Torunlar REIC Annual Report 2010 / 002 INDEX
INDEX 004 - MESSAGE FROM THE CHAIRMAN
007 - CORPORATE PROFILE
> Our vision > Our mission > Our strategies > Our values > Long - established history in real estate development > Proven performance in asset management > Excellent growth potential supported by strong financial assets
014 - AGENDA OF GENERAL ASSEMBLY MEETING
016 - FINANCIAL HIGHLIGHTS
017 - CORPORATE GOVERNANCE
> Board of Directors > Senior Management > Auditors > Capital Structure > Shareholding and Capital Structure Post-IPO > Financial Structure > Position of Company in the Real Estate Investment Company Sector
027 - SECTORAL ASSESSMENTS
> Real Estate Investment Company Sector > Construction Sector > Office Sector > Housing Sector > Retail Sector
037 - ASSETS OF TORUNLAR REIC
038 - Operational Assets 061 - Projects
Istanbul Istanbul > Torium Shopping Center > Mall of İstanbul > Nishistanbul > Ali Sami Yen Project Ankara > Torun Tower > Ankamall Bursa Bursa > Korupark Terrace > Korupark Shopping Center Samsun > Korupark Residences > Bulvar Samsun Shopping Center > Zafer Plaza Shopping Center Antalya > Deepo Outlet Center Muğla > Netsel Marina 003 INDEX
075 - FINANCIAL RESULTS AND EVALUATION
081 - SOCIAL RESPONSIBILITY PROJECTS
085 - INDEPENDENT AUDITOR’S REPORT
159 - CORPORATE GOVERNANCE ALIGNMENT REPORT Torunlar REIC Annual Report 2010 / 004 MESSAGE FROM THE CHAIRMAN
MESSAGE FROM THE CHAIRMAN
“2011 will be another year of investments for Torunlar REIC.”
Dear Shareholders,
The financial and economic measures taken in many countries in 2010 to mitigate the impact of the global economic crisis have started to take their effect. Following a 0.6% contraction in 2009, the global economy managed a 5% growth during the past year. However, it is believed that the sustainability of this growth will be possible through permanent arrangements in financial markets.
Turkey: The Shining Star of the World With the smoke dissipating on the global financial crisis in 2010, all eyes were once again on Turkey, whose economy grew by 8.9%. This performance, which defied expectations, placed Turkey among top countries within developing countries. To the BRIC zone composed of Brazil, Russia, India, China were added CIVETS countries (Columbia, Indonesia, Vietnam, Egypt, South Africa) including Turkey, altogether Aziz TORUN becoming the locomotive of the world economy. The growth trend in the Turkish Chairman of the Board and CEO economy has not only increased the confidence in the market, but also attracted the interest of foreign investors.
The continuous growth in the Turkish economy has been evident in the real estate sector in which Torunlar REIC operates. Construction and retail were the fastest growing sectors in 2010, with growth rates of 17.1% and 15.6% respectively. This strong growth trend is likely to continue in 2011, and housing, office, shopping center and hotel investments are also expected to meet the positive expectations in the business community. Home purchases in particular are likely to demonstrate an upward trend in 2011. According to the Central Bank’s consumer confidence index, consumers’ home –buying intention reached the highest level after the crisis with 100.42 points. Needless to say, this trend will create a major movement in the housing sector in 2011. In the same manner, retail is expected to continue its growth trend as a major locomotive sector.
Turkey, especially Istanbul, is on its way to becoming one of the major centers in the areas of tourism, healthcare, economy and finance for European, Middle Eastern, North Africa and Former Soviet Bloc countries. Advancements in these areas have also given rise to demand and growth beyond expectations in the hotel, retail and office sectors.
2011 will be a year of investments for Torunlar REIC We consider 2010 a turning point for Torunlar REIC for several reasons. We successfully completed our initial public offering process, which is one of the most significant indicators of our company’s future-oriented vision. We started trading our shares in the Istanbul Stock Exchange as of October 21st, 2010. Closing 2010 005 MESSAGE FROM THE CHAIRMAN
with net assets of 2.5 billion TL, portfolio value of 3.1 billion TL and market value of 1.4 billion TL, Torunlar REIC has the honor and responsibility of being the Real Estate Investment Company with the second highest value currently traded in the Istanbul Stock Exchange. Being one of the top 50 most valuable companies in the market with its current market value, Torunlar REIC started to be traded in the Istanbul Stock Exchange top 100 starting on April 1st, 2011. With the public offering of Torunlar REIC, the market value of other Real Estate Investment Companies traded in the Istanbul Stock Exchange increased significany. Consequently, foreign investors and local investors, who make up 70% of the stock exchange, began to view Real Estate Investment Companies as priority shares to invest in.
Following the important process of initial public offering, we opened the Torium shopping center, our first investment of this kind, on October 30th, 2010. Thanks to its size, varied types of stores, and the firsts it brought to the sector, Torium attracted a large number of visitors in a short time, increasing our faith in our investment even further.
Parallel to the development in the Turkish economy and the real estate sector, Torunlar REIC is now focusing on a new period. In light of all these positive indicators, our objective from now on is to increase the efficiency of the projects in our portfolio, to maintain sustainable visitor and retailer interest in our shopping center investments, and to create added value in our sector with our new projects. Therefore, 2011 is an important year of investments for us.
We continuously invest in new projects
We continue to create added value with our prestigious projects expected to become future landmarks for Istanbul
In April 2011, we started the construction and residence sales for our Mall of Istanbul project, the largest mixed use project in Turkey yet to include a shopping center, housing, office and hotel units. The project has already attracted a great deal of interest as evidenced by the preliminary sales of 220 apartments within the first three days following the opening of our sales office. We plan to start the construction of Torun Tower in Esentepe and Ali Sami Yen lot project in which Torunlar REIC has a 65% share in the 3rd quarter of 2011. Our aim is to make the Torun Tower, the Ali Sami Yen Project, and the Mall of Istanbul into new landmarks for Istanbul.
Our investments outside of Istanbul also continue at full speed. Apartment sales for our Korupark Terrace project in Bursa started on April 15th, reaching 115 apartments sold within two weeks.
On the other hand, Bulvar Samsun Shopping Center, a joint venture with Turkmall, and Deepo Antalya Shopping Center expansion project we plan to start in the last quarter are important projects for the retail sectors in their respective regions.
With the expectation that both the national economy and the global economy will reach a state of sustainable growth, our company is determined to fortify Torunlar REIC Annual Report 2010 / 006 MESSAGE FROM THE CHAIRMAN
its competitive position, while implementing its current growth and investment projects through its solid financial structure. With the completion of all these projects, we aim to see Torunlar REIC within the Istanbul Stock Exchange 30 by the year 2014.
What distinguishes us from other Real Estate Investment Companies is that we have the vision and experience to successfully develop and implement mixed use projects, in addition to shopping centers, which is our main focus, and residences, offices and hotels.
The five shopping centers that make up our assets have the largest shop mix in their regions. Furthermore, they possess the qualities in terms of location, architecture, and management approach that will keep them successful in the future .
At Torunlar REIC, we try to further improve our operational and financial governance, investor relations and customer satisfaction. Taking solid steps towards these targets, we feel you, our esteemed shareholders and business partners, are always with us. I wholeheartedly believe that with the strength we receive from you, we will carry our growth-focused vision forward and continue to create added value for you, our social stakeholders, our industry, and ultimately, our country.
I would like to note that we do not regard you as investors who want to try their luck in the stock market. By putting your trust in our company, you have become partners in our risks as well as our gains. As major shareholders and management, we are aware of the responsibility this entails. Our aim is to carry this responsibility successfully through hard work and dedication and become an exemplary Real Estate Investment Company.
We believe that we will extend the confidence we have created through the concept of “solid as a rock” to our Torunlar REIC shares as well. It takes years to develop and implement large-scale investment projects such as the ones we are planning; therefore, we ask you to evaluate our company’s success not through the daily fluctuations of the stock market, but through the size and the ambition of our projects and the determination with which we bring them to life.
On behalf of our board of directors, I would like to thank you for sharing this belief and our employees who are the real owners of our success.
Respectfully,
TORUNLAR REAL ESTATE INVESTMENT COMPANY Chairman of the Board and CEO Aziz Torun 007 CORPORATE PROFILE > Our Vision > Our Mission > Our Strategies > Our Values > Long - established history in real estate development > Proven performance in asset management > Excellent growth potential supported by strong financial assets Torunlar REIC Annual Report 2010 / 008 CORPORATE PROFILE
WE ARE GROWING STEADILY
For the past 50 years, our business has helped to make life more beautiful across our country with shopping centers, residences, and office buildings.
PORTFOLIO VALUE AT Operating in the Turkish real estate market since 1977, Torunlar Group established Toray Construction in 1996 as the parent company of Torunlar REIC, in order to 3.1 BILLION TL expand our activities in the real estate market to retail, housing, and office and hotel development projects. The main function of Torunlar REIC, which became a Real Estate Investment Company in 2008, is to invest into real estate development projects for retail, housing, entertainment venues and office spaces.
Torunlar REIC is involved in all stages of project development and management including the sourcing, land acquisition, project financing, permitting, design, construction oversight , sales and marketing. In addition, the company also manages completed projects. Our services include managing the tenant mix, renovation and expansion work within our shopping centers. We are also in charge of other operations that aim to increase the number of visitors, raise occupancy rates and rental income. 009 CORPORATE PROFILE
INVESTMENTS OF $700 Our company’s experience and know-how is based on a clear understanding of urban development, demographic trends and potential customer profiles in our target MILLION TARGETED markets. This understanding is accompanied by a wide network, which affords us WITHIN 4 YEARS, UP the means to purchase land suitable for development at favorable prices. We have TO 100% INCREASE IN priority access to a wide range of benefits thanks to our deep-rooted relations with local suppliers, contractors, vendors and many other players in the sector. RENTAL AREAS Torunlar REIC optimizes a wide network consisting of national and international retail brands creating the tenant mix at its shopping centers. Similarly, Torunlar REIC has a wide customer base for our housing development projects. Also taking advantage of the established reputation of the Torun family in the Turkish market, Torunlar REIC continues to create value with the concept of quality and confidence, which our tenants, customers and other participants of the Turkish real estate market associate with the Torunlar name .
The fundamental area where our establishment focuses is the development, implementation and asset management of wide scope and top-of-the-class shopping centers in urban areas such as Istanbul, Bursa, Antalya and Ankara. Having reached 3.1 billion Turkish Liras as of December 31st, 2010 and consisting of 14 real estates, our portfolio includes five operating shopping centers and a total of 214,697 m2 of GLA (Gross Leasable Area). Approximately 76% of the real estate portfolio of our company in value consists of shopping centers. Various mixed-use development projects with high growth potential for housing, office and hotels and plots of land are also in the portfolio. Torunlar REIC Annual Report 2010 / 010 CORPORATE PROFILE
A GROWTH STRATEGY Step by step success As Torunlar, we started the development of our first shopping center, Zafer Plaza FOCUSED ON RENTAL in Bursa, in 1996. Zafer Plaza, opened in 1999, was Bursa’s first shopping center. INCOME AND Since that date, our company has developed commercial and residential projects in SHOPPING CENTERS many regions of Turkey and invested in them. In 1997 we became a shareholder of Yeni Gimat A.Ş., the current owner of Ankamall and Crowne Plaza Hotel in Ankara. As of today, our company has 14.83% of Yeni Gimat’s shares. In 2004 we completed the development process of the Deepo Outlet Center in Antalya and opened it for service. The following year, we became 44.6% shareholders of Netsel Tourism Investments A.Ş. in Marmaris (Netsel Marina). By 2008 we completed the first phase of Korupark Homes, and the 2nd phase by the end of 2009 and we put it up for sale.
Gradually we turned our focus to projects in Istanbul. During the first quarter of 2009 we started the preliminary sales of residential units in NishIstanbul, which has a total saleable and leasable area of 81,066 m2 consisting of residential, office and retail sections. In August 2010 we completed the construction of the residential and office units and started deliveries. Torium, a mixed-use shopping center and residential complex with 95,280 m2 of GLA and 5,318 m2 of NSA, opened in Esenyurt, Istanbul on October 30th, 2010.
In 2007 we launched Mall of Istanbul, one of the largest mixed-use development projects based on GLA, in Turkey and Europe. Construction started in April 2011, with an expected completion date in late 2013. 011 CORPORATE PROFILE
VISION - MISSION - STRATEGY
OUR VISION To transform Torunlar Real Estate Investment Company into a leading development and management company on a global scale in the area of mixed-use life-style centers consisting of units such as shopping centers, residences, offices and hotels.
OUR MISSION > To increase our know-how, experience and high confidence in developing life- style centers and to become the name synonymous with high-quality life concept.
> To provide shopping centers, entertainment and business areas, and residential units reflective of the needs, preferences and interests of our customers, and adapt as they evolve.
> To establish and maintain a satisfying cooperation with all our stakeholders including our shareholders, employees, our tenants based on fair principles.
> To generate a network of reliable, sustainable and growing life-style centers.
OUR STRATEGY > To continue to focus on shopping malls while increasing retail-based mixed-use projects.
> To produce mixed-use projects with offices, residences and hotel units taking advantage of the synergy of shopping centers.
> Active and dynamic asset management of our shopping malls.
> To continue to leverage our strong development platform.
> To pursue selective developments in other high-growth real estate sectors.
> To leverage our track record of joint development arrangements. Torunlar REIC Annual Report 2010 / 012 CORPORATE PROFILE
VALUES CREATED BY TORUNLAR REIC FOR ITS INVESTORS
Established track Torunlar REIC has a long history of active involvement in the Turkish real estate industry, first in the construction sector beginning in 1977 and later expanding into record of real estate real estate development and investment. Over our history, we have consistently development demonstrated our strategic and execution capabilities and established a reputation as one of the leaders in designing and developing shopping malls in Turkey. Our experience affords us invaluable knowledge about all stages of the development cycle, including land sourcing, financing and cost structure, permitting, design, construction and marketing. We have the reputation and network to obtain access to attractive local sites combined with the commitment to apply a high level of international architectural, design and safety standards in our projects.
Proven history of Torunlar REIC is directly and actively involved in the asset management of its shopping centers after they become operational, including through managing successful asset leading national and international tenant mix, entertainment areas, diversified management social and educational facilities designed to maximize foot fall and occupancy levels of our shopping malls. We refurbish or expand the shopping malls in our portfolio to accommodate increased demand. Our dynamic approach to asset management is also exemplified by the strategies we adopted across all segments of our business which helped us successfully navigate through the global recession. We have earned a reputable position in the industry in terms of asset management as we maximize our rental income by increasing the proportion of rental payments dependent on the sales turnover of the tenants on top of base rents through suggestions and campaigns intended to increase their sales revenues. As a part of our residential sales strategy, we improve cooperation with our primary commercial lending banks in order to initiate housing loans for potential residential buyers. Finally, we also provide company financing to eligible purchasers of our residential units who do not wish to use bank loans. 013 CORPORATE PROFILE
Excellent growth Our project pipeline and solid financial structure position us for future growth. As of December 31, 2010, our project pipeline and land available for future development potential supported by projects collectively accounted for 31% of our Property Portfolio by value. solid financial structure As Torunlar REIC, we intend to continue to replenish our project pipeline with new and attractive development opportunities and to pursue rental growth through other asset management initiatives, such as refurbishments and extensions of our shopping malls.
Our solid financial position should continue to help us maximize our growth potential. Our funding policy is to limit our maximum loan-to-value ratio to 40%. It also provides us with sufficient flexibility in loan negotiations to fund our anticipated growth plans. Our solid financial position allowed us to continue development activities during the recent financial crisis, such as proceeding with construction of NishIstanbul. This structure also affords us the necessary flexibility to finance our capex plans of $700 million. Going forward we intend to continue to carefully manage our cost of debt and remain primarily financed by equity in order to maximize our financing and operational flexibility.
As of 31.12.2010, our equity to assets ratio is 74%, our average loan maturity is 5 years, and our average interest rate is 5.22%. Torunlar REIC Annual Report 2010 / 014 AGENDA OF THE ORDINARY GENERAL ASSEMBLY MEETING
AGENDA OF THE ORDINARY GENERAL ASSEMBLY MEETING OF TORUNLAR REIC DATED 25 MAY 2011
1. Opening and election of the Presiding Committee,
2. Authorization of the Presiding Committee to sign the minutes of the General Assembly.
3. Reading of and deliberations on the Board of Directors’ Report on the operations and accounts of the year 2010.
4. Reading of and deliberations of the Auditors’ Report and the summary statement of the independent external auditing firm Başaran Nas Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş.
5. Approval, approval after modification or refusal of Board of Directors’ submission of 2010 Financial Statements.
6. Approval, approval after modification or refusal of the proposal concerning the distribution of profit.
7. Discharge of the Members of the Board of Directors from liability in respect of their operations in the year 2010.
8. Discharge of the Auditors from liability in respect of their operations in the year 2010.
9. Re-election or replacement of the Members of the Board of Directors and assignment of their term of office.
10. Re-election or replacement of the Auditors and assignment of their term of office.
11. Decision on the monthly honorarium of the Chairman and Members of the Board of Directors, and the monthly gross remuneration of the Auditors.
12. Informing the General Assembly Providing information on the purchase of the following shares in the 18.208,90m² real estate located at Block 858, plot 1: namely the purchase of the 193,84 m2 land share equivalent to a total share of 2044/192000 from Fadime Sönmez, Gülten Ocak, Gülşen Karagülle and Ergün Sönmez being inheritors of Remzi Sönmez for a price of 360.000,00 TL, of the 26,40 m2 land share equivalent to a share of 348/240000 from Sedat Kurt for a price of 49.000 TL, of the 121,70 m2 land share equivalent to a share of 1604/240000 from Yaşar Aslan for a price of 223.000 TL, of the 6.787,06 m2 land share equivalent to a share of 5591/15000 belonging to TOKİ (Housing and Development Administration) for a price of 6.830.000,00 TL, of the 430.02 m2 land share equivalent to a share of 5668/240000 from Selami Kurt for a price of 800.000 TL, of the 65.79 m² land share equivalent to a share of 1301/360000 from Aydın Bilgili for a price of 122.000 TL, of 015 AGENDA OF THE ORDINARY GENERAL ASSEMBLY MEETING
the 52,72 m2 land share equivalent to a share of 695/240000 from Yiğit KOÇ for a price of 158.000 TL.
13. Discussion, approval or refusal of the amendment draft texts relating to Articles 6, 21, 25 and 27 of the company’s Articles of Association.
14. Informing our shareholders on the company dividend policy for 2011 and subsequent years in pursuance of Corporate Governance Principles.
15. Decision on the company’s disclosure policy in pursuance of Corporate Governance Principles.
16. Decision on the Company’s Code of Conduct in pursuance of Corporate Governance Principles.
17. Informing the General Assembly on the donations and contributions made by the company in 2010 to tax-exempt foundations and associations for the purpose of social responsibility.
18. Approval of the independent external auditing firm elected by the Board of Directors as per the Capital Markets Board communiqué on Independent Audit Standards in the Capital Markets.
19. Informing the General Assembly on the details of securities, pledges and mortgages granted in pursuance of the Capital Markets Board’s 09/09/2009 dated resolution No. 28/780.
20. Proposal to grant permission to the Members of the Board of Directors to perform directly or on behalf of others, the transactions that fall within the scope of the company’s activities, to become shareholders in companies performing such transactions and to conduct other transactions as set forth in Articles 334-335 of the Turkish Commercial Code.
21. Wishes and requests.
22. Closing. Torunlar REIC Annual Report 2010 / 016 FINANCIAL INDICATORS
FINANCIAL INDICATORS
TL (OOO) 2009 2010 VARIANCE (%)
TOTAL REVENUES 120.158 232.928 93,9
RESIDENCE SALES 65.380 160.585 145,6
SHOPPING CENTER RENTAL REVENUES 39.859 58.584 47,0
EBITDA (EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTIZATION) 71.700 55.377 -22,8
EBITDA MARGIN %59.7 %23.8 -35,9
DIVIDEND REVENUES 4.536 4.745 4,6
NET GAIN FROM FAIR VALUE ADJUSTMENTS ON INVESTMENT PROPERTY 488.159 166.660 -65,8
NET PROFIT 535.641 214.245 -59,4
LIKE-FOR-LIKE RENTAL REVENUE INCREASE %-3.4 %33
OCCUPANCY RATE %98 %98 0,0
TOTAL ASSETS 2.509.787 3.203.839 27,7
TOTAL EQUITY 1.805.168 2.369.083 31,2
NET DEBT POSITION -547.895 -344.619 37,1
PORTFOLIO VALUE 2.603.000 3.130.000 20,2
MARKET CAP (31.12.2010) 1.411.200
EARNINGS PER SHARE 3,04 TL 1,16 TL -68,0 017 CORPORATE GOVERNANCE > Board of Directors > Senior Management > Auditors > Capital Structure > Shareholding and Capital Structure post-IPO > Financial Structure > Position of Company in the REIC Sector Torunlar REIC Annual Report 2010 / 018 CORPORATE GOVERNANCE
BOARD OF DIRECTORS
Born in Kemah, Erzincan in 1950, Mr.Torun graduated from Istanbul University, Faculty of Economics in 1975. He also attended the courses of the Sociology department in the Faculty of Literature in the same university until the fourth year of study.
He started working at the age of 7 at his father’s tea house. Professionally, he worked as an inspector at the Ministry of Labor and Social Security between 1976 and 1982. He also attended doctorate seminars at the Faculty of Economics during this time. He continued working without interruption at a grocery store throughout his high school and university years..
He left his job as an inspector in 1982 and decided to work for the private sector. Soon after, Torunlar Group of Companies was founded. He also acts as the Chairman of the Board of Directors for some of the companies in Torunlar Group. He is married and has two children. Aziz TORUN Chairman of the Board of Directors and CEO
Born in 1939 at Kemaliye – Başpınar, Mr. Coskun graduated as an Electrical Engineer from Yıldız Technical University. He received his Master’s degree in Managerial Economics. He is a certified public accountant with an honors degree from the Hamburg Wirtschaft Academie. He speaks German and English. He is married and has 2 children.
Some of the companies where he has worked as General Manager, member of the Board of Directors, managing director, Chairman of the Board and founder are Çanakkale Ceramics A.Ş., Kale Porcelain Electrotechnical Industry A.Ş., Kalebodur Ceramics Ind. A.Ş., Turk Saudi Investment Holding A.Ş., Turk Sugar Factories A.Ş., Bisan Bicycle Industry and Trade A.Ş., Coşkun Engineering Consulting Ltd. Co., Emsay Industry and Trade A.Ş.
He is the deputy of the Grand National Assembly for the 20th, 21st and 22nd terms. He has acted as the President of the Grand National Assembly National Defense Commission, member of the Planning and Budgeting Commission, member of the Ali COŞKUN Industry, Trade, Energy, Mining, Science and Technology Commissions. Deputy Chairman of the Board of Directors
He has served as the Minister of Industry and Trade in the 58th and 59th Governments. 019 CORPORATE GOVERNANCE
Born in 1953 in Agacsaray, Kemah in Erzincan, Mehmet Torun, the junior of two brothers (the other, Aziz Torun) started his professional career working for his father Osman Torun in a small shop in 1962. He started his business life when he was young , taking early steps for success. He married in 1976 and has 3 children.
He is currently the Chairman of the Board of Directors of Torunlar Food Industry and Trade A.Ş., Torun Tea A.Ş., Tobaş Torun Bio Energy A.Ş., Torun Marketing A.Ş., Torunlar Oil A.Ş., National Foreign Trade A.Ş., Kütahya Sugar Factory A.Ş., all of which are within Torunlar Group. He is the Deputy Chairman of the Board of Directors of Torun Construction Industry and Trade A.Ş., Depa Vegetable Oil A.Ş., Deputy Chairman of the Board of Directors of Nokta Construction A.Ş. and member of the Board of Directors of Netsel Tourism A.Ş. He is also a founding partner of Torunlar Real Estate Investment Company.
Mehmet Torun Member of the Board of Directors
Born in 1980, Yunus Emre Torun graduated with a 4 year Bachelor’s Degree in Economics in 2002 from Marmara University, Economic and Administrative Sciences Faculty. He received a diploma in Advanced English at UCLA in California, USA in 2003. He is currently a member of the Board of Directors of Torunlar Food Industry and Trade A.Ş. and Chief Marketing Officer and member of the Board of Directors of Torunlar Real Estate Investment Company. He speaks English. He is married and has one child.
Yunus Emre TORUN Member of the Board of Directors / Chief Marketing Officer Torunlar REIC Annual Report 2010 / 020 CORPORATE GOVERNANCE
Born in Sincanlı, Afyon in 1961, Mr. Karabiyik graduated from the Law Faculty of Istanbul University in 1982.
Following the legal internship he completed in 1983, he has practiced law with specialization in Commercial Law, Company law, Banking and Capital Markets Law, and Bankruptcy Law.
Mahmut KARABIYIK Member of the Board of Directors
Born 1952 in Kayseri, Mr. Mumcuoglu graduated from the Business Administration Faculty of Istanbul University in 1974.
He has worked as the Deputy Chairman of the Board of Directors of TC Ziraat Bank A.Ş. since 2005. He has also held the posts of member of Board of Directors of TC Ziraat Bank A.Ş., Managing Director of the TC Ziraat Bank A.Ş. Board of Directors. He speaks English and German. He is married and has two children.
Mehmet MUMCUOĞLU Independent Member of the Board of Directors 021 CORPORATE GOVERNANCE
Dr. Alp was born in Rize in 1964. He graduated from the Political Sciences Faculty of Ankara University in 1987. He received his Bachelor’s Degree in business administration at Ankara University in 1987, his Master’s Degree in business management at Marmara University in 1991, and his Doctorate in business administration at Ankara University in 1995.
Since 2007, he has worked as a professor in the Business Administration Department at Economy and Technology University founded by the Union of Chambers and Commodities of Turkey. He was an associate professor at the same university prior to this. He has also been working as a part-time instructor at Bilkent University. He has worked as Associate Professor of Finance and Accounting at Interuniversity Board and visiting instructor at the University of Illinois at Urbana-Champaign. He conducted his doctorate research at Maastricht School of Management.
Prof. Dr. Ali ALP Independent Member of the Board of Directors Torunlar REIC Annual Report 2010 / 022 CORPORATE GOVERNANCE
SENIOR MANAGEMENT
Aziz TORUN Aziz Torun’s CV is enclosed in the Board of Directors section. Chairman of the Board and CEO
Yunus Emre TORUN Yunus Emre Torun’s CV is enclosed in the Board of Directors section. Member of the Board of Directors / Chief Marketing Officer
İlham İnan DÜNDAR Born in Eskişehir in 1960, Mr. Dundar graduated in 1984 from Kütahya Chief operating Officer / Shopping Mall Management Administrative Sciences College under Anadolu University Economic and Administrative Sciences Faculty. He earned a Business Administration Specialization Certificate at Istanbul University’s Managerial Economics Institute in 1985.
He joined in 2007 Torun Shopping Mall Investment Management A.Ş. as general coordinator and became assistant general manager in charge of shopping mall management at Torunlar REIC in 2008.
Remzi AYDIN Born in Elazığ in 1969, Mr. Aydın graduated from Fırat University’s Civil Engineering Chief Construction Officer Department in 1992. In 1993 he started his professional career at Torunlar Group as a civil engineer. He has held various positions within the group since then. He is currently responsible for project implementation at Torunlar REIC.
Yezdan KANAAT Born in 1975 in Istanbul, Mrs.Kanaat graduated from Istanbul Technical University’s Chief Development Officer (ITU) Architecture Department in 1998. She completed MBA Program in 1999, again at ITU.
She was group manager at Doğuş – GE REIC. and Assistant General Manager responsible for project development between 2006 and 2008, assistant manager at Garanti REIC. between 2004 and 2006. Sh e was in charge of investments at Garanti REIC. between 2002 and 2004, an executive at Iktisat REIC. between 2000 and 2002, and a specialist at Yüksel Construction A.Ş. between 1998 and 2000.
İsmail KAZANÇ Born in Tekirdağ in 1972, Mr.Kazanc graduated from Bilkent University’s Business Chief Financial Officer Administration Department in 1994. He received his Master’s Degree in International Financial Markets from the University of Southampton. He worked at Arab- Turkish Bank as assistant general manager between 2008 and 2009, as Treasury Department group manager at İş Bank between 2006 and 2008, as Treasury Department assistant manager at İş Bank between 2002 and 2006, and as inspection board inspector at İş Bank between 1994 and 2002. 023 CORPORATE GOVERNANCE
AUDITORS
Kadir BOY Born in Geyve, Sakarya in 1956, Mr. Boy graduated from Ankara University’s Political Sciences Faculty in 1979. He was assigned to the Tax Inspectors Board of the Ministry of Finance in 1980 where was promoted to Tax Inspector in 1983, and Chief Tax Inspector in 1990. He gained professional experience in the UK for one year in 1987,and for 4 months in 1993. He was Deputy Chairman of Tax Inspectors Board at the Istanbul Group and Deputy Chairman of the Board between 1990 and 1993. He became assistant head of the Tax and Revenue Office of Istanbul on 15.12.1993. After six years in this post he became Acting Head of the Tax and Revenue Office of Istanbul on 02.03.1999 and became Head of the Tax and Revenue Office of Istanbul on 12.01.2000. He retired when he was Deputy Undersecretary of the Finance Ministry for the term 2004-2005. He is married and has one child.
Gözde GÖKTÜRK Born in Üsküdar, Istanbul in 1981, Ms. Göktürk graduated from Istanbul University’s Law Faculty in 2004 and completed her legal internship as a member of the Istanbul Bar. She later worked as an attorney in a law firm specializing in Commercial Law, Company Law and Private Law, providing companies with consultancy and legal assistance services. She has also held an active position at the Istanbul Bar Criminal Court Legal Enforcement Service as a defendant. Torunlar REIC Annual Report 2010 / 024 CORPORATE GOVERNANCE
CAPITAL STRUCTURE
Shareholding and Capital Structure post-IPO
NAME LAST NAME / TRADENAME SHARE PERCENTAGE (%) SHARE AMOUNT (TL)
Aziz TORUN 37,455 83.788.309
Mehmet TORUN 37,374 83.717.869
Torun Marketing JSC 0,0283 63.396
Ali COŞKUN 0,002 3.522
Yunus Emre TORUN 0,031 70.440
Mahmut KARABIYIK 0,002 3.522
New Shareholders After Public Offer 25,157 56.352.942
TOTAL CAPITAL 224.000.000
Shares offered to the public are traded since 21.10.2010 at the Istanbul Stock Exchange. 025 CORPORATE GOVERNANCE
FINANCIAL STRUCTURE
Consolidated sales of Torunlar REIC rose from 120.1 million TL in 2009 by 93.9% to reach 232.9 million TL in 2010 through the sales revenues from the NishIstanbul project in 2010 and the effect of Torium Shopping Center opened in October 2010. The gross profit went up to 80 million TL, a 6.7% increase from 2009. The consolidated EBITDA of the company receded by 22.8%, from 71.7 million TL to 55.4 million TL. The reason for this decline is the payment to the Bursa Metropolitan Municipality for the royalty rights of the lightrail station and the increasing property taxes and advertising costs. The consolidated net profits of Torunlar REIC in 2010 were 214.2 million TL. The ratio of the total equity to the liabilities is 74%. Eighteen percent of the total assets is tied up to current assets and 82% to fixed assets.
Position of the company in the REIC sector The portfolio of our company as of 31.12.2010 is valued at 3,130,802,000 TL, the net asset value as of the same date is 2,505,627,000 TL. Our capital is at 224,000,000 TL and our net asset value per share is 11.19 TL.
Our company is a Real Estate Investment Company focused on shopping centers. It is the 2nd most valuable company among the 21 public Real Estate Investment Companies. Among the competitive advantages of our company are its focus on developing projects in cities with high populations such as Istanbul, Ankara, Bursa, Antalya, Samsun, and Muğla; its resilience to economic crises thanks to the regular cash flows from shopping centers; its developing projects with high growth potential, and financing them with equity.
027 SECTORAL ASSESSMENTS > REIC Sector > Construction Sector > Office Sector > Housing Sector > Retail Sector Torunlar REIC Annual Report 2010 / 028 SECTORAL ASSESSMENTS
REAL ESTATE INVESTMENT COMPANY SECTOR
The market value of REICs increased by 278% in 2010 from $1.9 billion to $7.3 billion . The initial public offerings of certain Real Estate Investment Companies had a big impact on value appreciation in 2010. The initial public offerings of the six Real Estate Investment Companies in 2010 raised the market value of Real Estate Investment Companies by approximately $4.5 billion.
The year-end market values of REICs that went public in 2010 made up 64% of the market value of the entire sector. With the contribution of companies going public in 2010 there was a similar increase in the total net assets of the sector. Sixty-five percent of the net assets as of December 31st, 2010 consisted of REICs that recently went public. The net assets of the sector were valued at $9.0 billion as of 31.12.2010.
While the four major REICs made up 79% of the asset value of the public REICs, in terms of net assets, Emlak Konut REIC, Torunlar REIC, Iş REIC and Sinpaş REIC emerged as the large scale REICs with net assets of more than 1 billion TL.
The Istanbul Stock Exchange (ISE) – 100 index rose by 25.6% in 2010, and the REIC sector’s return was 27%. There was not a significant change in legislation that could impact the activities of REICs. 029 SECTORAL ASSESSMENTS
Real Estate Investment NAV ($ mill) INTERNAL MARKET VALUE ($ mill) INTERNAL Companies (REIC) 31.12.2010 (%) 31.12.2010 (%)
EMLAK KONUT 3.750,80 41,7 3201,8 44,0
TORUNLAR 1.620,70 18,0 912,8 12,6
İŞ 907,8 10,1 512,3 7,0
SİNPAŞ 793,8 8,8 672,7 9,3
AKMERKEZ 514,3 5,7 731,1 10,1
REYSAŞ 189,8 2,1 105,6 1,5
ALARKO 170,5 1,9 114,7 1,6
MARTI 149,9 1,7 74,7 1,0
TSKB 142,9 1,6 91,2 1,3
ATAKULE 135,7 1,5 73,4 1,0
Y&Y 120,7 1,3 333,1 4,6
DOĞUŞ GE 114,5 1,3 104,3 1,4
VAKIF 70,8 0,8 45,7 0,6
PERA 66,0 0,7 44,1 0,6
ÖZDERİCİ 65,3 0,7 74,4 1,0
YAPI KREDİ KORAY 58,4 0,6 51 0,7
SAĞLAM 47,5 0,5 32,2 0,4
NUROL 38,8 0,4 26,2 0,4
AVRASYA 17,7 0,2 41,8 0,6
EGS 12,1 0,1 10,7 0,1
İDEALİST 7,7 0,1 17,5 0,2
TOTAL 9.000.00 100,0 7.271,10 100,0 Torunlar REIC Annual Report 2010 / 030 SECTORAL ASSESSMENTS
CONSTRUCTION SECTOR
The 2005=100 Base Year Building Construction Cost Index increased by 1.57% in total during the 4th quarter of 2010 compared to the previous period, by 7.52% in comparison to the same period of the previous year, and by 5.75% compared to the average of all four quarters.
Construction Permits, YTD January-December
NUMBER OF UNITS
2010 823.060
YEARS 2009 518.475
2008 503.565
Certificate of occupancy, YTD January-December
NUMBER OF UNITS
2010 351.435
YEARS 2009 404.058
2008 357.286
(Source: Turkish Statistical Institute)
OFFICE SECTOR
The office market is concentrated in Istanbul. While the demand has been increasing since the middle of 2010, the total area in Grade-A project status in Istanbul is at the same level as 2009. The majority of the projects are on the Asian side of Istanbul, mostly in Ümraniye. Starting in the 2nd quarter of 2009, the average rents have remained fixed at the level of 30 Euros/m2/month. Supply of Grade-A office spaces are estimated to be nearly 2.5 million m2. Forty-four percent of this is in the Central Business Districts (CBD), 29% is on the Asian side and 27% is on the non-CBD European side.
The number of grade-A office supply in CBDs is expected to reach a reasonable level by 2013.There will be a shortage of supply in the market until office buildings in the development phase are completed. Supply on the Asian side is expected to be strong in the next two years with a take-up of 200,000 m2. 031 SECTORAL ASSESSMENTS Torunlar REIC Annual Report 2010 / 032 SECTORAL ASSESSMENTS
HOUSING SECTOR
The housing demand experienced the most remarkable level of growth in the construction sector due to population increase, urbanization, pent-up demand, economic stability and cheaper financing. This is confirmed by 76% share of the housing sector in the total construction permits in the 3rd quarter of 2010. Home ownership in Turkey is between 45-50%. Forty percent of the present housing stock needs to be renewed. Housing investment constitutes a major protective shield against inflation.
In terms of housing loans, 2010 was a year when interest rates fell, costs decreased and maturity options widened. Along with this positive atmosphere in housing loans, nearly 350,000 people used housing loans worth more than 15 billion TL in total in 2010 and 49-72 months maturity. Loans with maturity above 73 months were the most popular. The increase in the utilization of housing loans in 2010 was also positively affected by the expansion of housing supplies, stagnation in the housing prices, banks reducing loan profit margins and rise in the consumer confidence. Housing loans increased by 34.8% over the previous year to reach 56.4 billion TL by December 2010. The average monthly interest rates were 0.9% in the third and fourth quarters of the year.
Within the framework of the new rules brought on by the Banking Regulation and Supervision Agency and the Central Bank, banks are now able to provide loans up to a maximum of 75% of the real estate values. This, along with the increase of reserve requirement ratios for the banks, is aimed at tightening loan conditions. According to the Association of Real Estate Investment Companies, major cities, especially Istanbul, are offering long-term opportunities; therefore, the demand for housing is expected to exceed the supply. The annual demand for housing is expected to continue at 250,000 units until 2015 while supply will reach around 180,000 units per annum.
The largest demand for housing comes from the middle to low income groups. Due to high land prices, private developers are focusing on projects that aim for the high- middle and upper income groups. As developers offer smaller units, banks extend the maturity of loans, and the interest rates are at an all-time low, the demand of the young and growing middle class is increasing. 033 SECTORAL ASSESSMENTS
Residential Unit Sales ( Turkey )
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010
(Source: Association of Real Estate Investment Companies ) Torunlar REIC Annual Report 2010 / 034 SECTORAL ASSESSMENTS
RETAIL SECTOR
Modern retail started in Turkey with stores such as Sümerbank, Migros and Gima, which were opened with government support in the 1960’s. Until the 1980’s there were family companies of small scale such as IGS and Beymen, in retail. After 1984, foreign brands started to show up in our retail world. Transition to organized structures started with the Galleria Shopping Center in late 1987. With Capitol and Akmerkez in 1993, the retail sector went into the branding and chain creation stage. Transition to organized retail started in Anatolia with the opening of Ankara Ankamall and Bursa Zafer Plaza in 1999. With shopping centers in the 2000’s, new trends in retailing started to develop with visual merchandising and trained human resources.
Consumer trends and technological developments that rapidly advanced throughout the whole world also brought about major changes to the retail sector in Turkey. Negative aspects of traditional retail such as off the record employment and trading were taken under control and the sector showed a major development within the past decade.
While the share of the retail sector in the national economy was 7.9% in 2008, it went down to 7.4% because of the crisis. However it surged to 9.2% in 2010. The total size of the retail sector in Turkey is around $200 billion. Organized retail grew by 6% in 2010 to reach a share size of $76.3 billion.
According to data from the Trade Council of Shopping Centers and Retailers, the number of employees , which was 450,000 at the end of 2009 for organized retail sector increased by 15% (70,000) at the end of 2010 to reach 520,000. The total of those employed in the entire retail sector exceeds 2.5 million.
Twenty seven shopping centers were opened in 2010, bringing the total number to 269. In terms of size, the GLA increased from 5,750,000 to 6,500,000. Currently, there are shopping centers in 46 provinces of Turkey. The provinces of Isparta, Artvin and Hatay got their first shopping centers in 2010. The leasable area per 1000 people across Turkey is 89 m2, while in provinces where there are shopping centers, it is 112 m2.
(Source: Jones Lang LaSalle) 035 SECTORAL ASSESSMENTS
Numbers of Shopping TOTAL NUMBER OF 2009 2010 Centers as of the end of SHOPPING CENTERS 2009
2010 and Total Leasable ISTANBUL 80 92
Area ANATOLIA 156 171
TOTAL 236 263
TOTAL LEASABLE AREA 2009 (m2) 2010 (m2)
ISTANBUL 2.270.000 2.650.000
ANATOLIA 3.420.000 3.870.000
TOTAL 5.690.000 6.520.000 Torunlar REIC Annual Report 2010 / 036 SECTORAL ASSESSMENTS
Breakdown of shopping centers in terms of size (GLA)
9 Very large 907,964 m2 36 Large 1,940,690 m2 67 Medium 1,911,790 m2 157 Small 1,713,688 m2
Shopping centers smaller than 20,000 m2 make up 59% of the total number and 26% of the total GLA size. There are 112 shopping centers larger than 20,000 m2 across Turkey. The interest of foreign brands in the Turkish market has increased since the second half of the year. H&M came into the Turkish retail sector with two shops in the last quarter of the year, while existing luxury brands opened new stores in 2010 with recently joining new ones such as Chanel, Prada and Longchamps. Harvey Nichols opened its first store in Anatolia in Ankara, with Vakko and Beymen opening medium and large size shops in various cities across Anatolia. Food retail also grew by 6% in 2010. A growth of 20% occurred in the technology sector. The turnover in shopping centers in 2010 was 27.8 billion TL. The 2010 data shows that the organized retail sector, focused on by Torunlar REIC, is growing rapidly and on its way to becoming the locomotive of the national economy.
‘Torunlar REIC Shopping Center Footfall and Turnover demonstrated strong Variance Y-o-Y (%) Torunlar REIC Turkey and steady growth in Shopping Center Turnover 15.5* 15
2010’. Footfall 3.6** (3)
Occupancy Rate (%) 98 90
*Turnovers reported by Korupark, Deepo, Ankamall. Excludes Zafer Plaza and Torium **Excluding the recently opened Torium 037 ASSETS OF TORUNLAR REIC Operational Assets Istanbul > Torium Shopping Center > Nishistanbul Ankara > Ankamall Bursa > Korupark Shopping Center > Korupark Residences > Zafer Plaza Shopping Center Antalya > Deepo Outlet Center Muğla > Netsel Marina
Projects Istanbul > Mall of İstanbul > Ali Sami Yen Project > Torun Tower Bursa > Korupark Terrace Samsun > Bulvar Samsun Shopping Center Torunlar REIC Annual Report 2010 / 038 ASSETS OF TORUNLAR REIC
ASSETS OF TORUNLAR REIC
Total Portfolio Value: 3.1 billion TL Operational Assets (Shopping Centers and • Zafer Plaza Shopping and Lifestyle Center (Bursa/Osmangazi) (4.57%) • Korupark Shopping Center (Bursa/Emek, Osmangazi) (17.26%) Buildings) • Torium Shopping Center (Istanbul /Esenyurt) (17.56%) %41.68 • Korupark Social and Commercial Areas (Bursa) (0.29%) • Istanbul Beyoğlu Kemankeş Building (0.39%) • Korupark 1st and 2nd Phase Residences Bursa/Osmangazi – Emek (1.60%) Real Estate Projects (Office, housing, • Torium Housing Project (0.16%) business places) • Nish Istanbul 8 Offices (0.13%) • Torunlar & Özyazıcı Business Center – Residence and Office Project %0.73 (NishIstanbul) (0.44%)
Lots and Land • Istanbul / Başakşehir İkitelli-2 Lots (Mall of Istanbul Project) (20.63%) • Esentepe / Istanbul Lot (Torun Tower Project) (7.59%) %30.34 • Istanbul / Kayabaşı Lots (0.51%) • Korupark 3rd Phase Residences Lot (Bursa) (1.61%)
Participations • New Gimat Business Operations A.Ş. (14.83% shares) (4.42%) • Netsel Tourism Investments A.Ş. (44.60% shares) (0.98%) %12.40 • TTA Real Estate Investments and Management A.Ş. (40% shares) (0.47%) • TRN Shopping Center Investments and Management A.Ş. (99.997% shares) (6.53%)
Money and Capital Markets Instruments %14.85 039 ASSETS OF TORUNLAR REIC
Gross Asset Value (GAV) Breakdown (2010) Total: 2.7 billion TL
%76.22 SHOPPING CENTER
%9.89 OFFICE
%7.89 RESIDENTIAL
%2.80 OTHER
%2.10 HOTEL
%1.10 MARINA
Portfolio Value Breakdown Total: 3.1 billion TL
% 42 BUILDINGS
%30 PLOTS OF LANDS
MONEY & CAPITAL %15 MARKETS INSTRUMENTS
%12 PARTICIPATIONS
%1 PROJECTS
Black Sea Region
Marmara Region East Anatolia
Aegean Region Central Anatolia
PROVINCES WHERE TORUNLAR REIC IS PRESENT TARGET CITIES Torunlar REIC Annual Report 2010 / 040 ASSETS OF TORUNLAR REIC
Experienced Shopping Center Management and HIGH PERFORMANCE Bursa Bursa Ankara Antalya Istanbul Zafer Plaza Korupark Ankamall Deepo Outlet TORIUM
(1) (2) GLA (m2) 23.482 71.267 13.112 18.069 m2 95.280 m2
Total revenues 8.400.000 39.822.000 - 13.656.000 -
%Increase in footfall 2.43 9.8 2.6 -0.6 -
Number of stores 120 196 320 90 180
Occupancy rate (%) 98.15 96.35 100.00 99,57 99
(1) 72.26% shares. Rental income (2) 14.83 % shares. Dividend income (-) Not meaningful 041 ASSETS OF TORUNLAR REIC
Value of Shopping Centers
(000TL) 31-12-10 30-06-10 Number of Contracts
Bursa Zafer Plaza (*) 143.156 141.978 125
Bursa Korupark 540.510 533.591 178
Ankara Ankamall (*) 138.274 138.274 315
Antalya Deepo Outlet 204.321 204.321 82
Istanbul TORIUM 549.876 211.969 180
TOTAL 1.576.137 1.230.133 880
(*) Value of the Torunlar REIC shares Source: Appraisal report of Prime Real Estate and Consulting A.Ş. dated 31/12/2010 Torunlar REIC Annual Report 2010 / 042 ASSETS OF TORUNLAR REIC / OPERATIONAL ASSETS
TORIUM SHOPPING CENTER
NUMBER OF STORES 180
LEASABLE AREA 95.280 m2
COMMON CIRCULATION AREA 27.135 m2
TOTAL CONSTRUCTION AREA 256.900 m2
CAR PARK CAPACITY 2700 Vehicles
Torium is located in the most densely-populated residential area of Istanbul which is accessible within ten minutes to nearly three and a half million people from Beylikdüzü, Esenyurt, Gürpınar, Bahçeşehir, Küçük Çekmece, Florya, Büyük Çekmece. Being opened in October of 2010 on the D100 (E5) Highway on the Haramidere Junction, it has easy accessibility due to connecting roads around it and various mass transport means. It will also be accessible by metrobus soon and subway transportation in 5 years.
Being the third largest shopping center in Istanbul, Torium is pioneering a new current in the retailing and shopping center sector with its concept. In this concept, entertainment and food court reach 25% of the leasable area. Snowpark, the first snow facility of Turkey, is already known across the country as a fun sports complex covering 4,500 m2. Torium is on its way to becoming one of the most popular centers in Istanbul with the indoor 3,500 m2 ‘Starpark’ amusement center designed to appeal to all ages, Cinetech Cinemas with 9 screens and 1766 seats, and its 12- lane bowling alley.
Aiming to appeal to the young and working population in its region, Torium has a strong shop mix. Wide facades are provided to shops in shopping centers for the first time with 11 meters axis intervals, brands are represented in large surfaces. In addition to major stores such as Electroworld, Migros, YKM, Tekzen, brands such as H&M, LCW, Zara, C&A, GAP, Marks & Spencer are also present in Torium in large sqm. Another significant feature of the shopping center is the open bazaar floor. This level provides visitors with a comfortable environment with a café, bowling alley and outdoor sitting areas.
It is a refreshing shopping center with wide atrium and galleries, well-illuminated front that takes maximum advantage of daylight, splendid ponds, and rich landscaping.
043 ASSETS OF TORUNLAR REIC / OPERATIONAL ASSETS
2010 Assessment Torium regularly hosts events to promote its unique features. Snowpark has been publicized in the main news shows of television channels since its opening and has served as set for TV shows and movies. Campaigns such as ‘free movie ticket for 75 TL of shopping’ and ‘chance to win 3 Peugeots’ have enjoyed high levels of participation. Customer shuttles serve Beylikdüzü, Esenyurt, Gürpınar and Bahçeşehir. The Avcılar-Beylikdüzü metrobus line to be completed within 2011 will increase visitor density even further.
November – December 2010
RENTAL INCOME (TL) 4.181.000
FOOTFALL 2.055.000
Torunlar REIC Annual Report 2010 / 046 ASSETS OF TORUNLAR REIC / OPERATIONAL ASSETS
NISHİSTANBUL
NishIstanbul is a mixed-use project consisting of housing, office and retail spaces located next to the E5 highway, and 1.5 km from the Ataturk Airport at Yenibosna, Bahçelievler on the European side of Istanbul. The project is run by the Torunlar- Özyazıcı Project Partnership. The share of Torunlar REIC in the project is 60%.
585 housing units were built and put up for sale at NishIstanbul. Construction was completed in October 2010. There are 25 unsold housing units as of the end of 2010.
Thanks to its central location, the project offers both living and business areas. Offices with surface areas from 270 m2 to 1080 m2 are quite attractive to companies that deal in international trade due to their proximity to the airport.
The sale or lease of the 34 remaining out of 52 stores in the NishIstanbul Project will be completed in 2011.
Start of Project Construction July 2008 Number of Offices 63
Completion of Project Construction October 2010 Retail Units Area 10.937 m2
Actual Project Completion Ratio (Overall Project) % 100 Common and Technical Areas, Carpark 53.145 m2
Total Construction Area 135.218 m2 Indoor Carpark Capacity 1277
Residential Area (3 blocks) 53.204 m2 Private Parking Capacity 131
Number of Residence Flats (3 blocks) 585 Total Vehicle Capacity 1.408 Vehicles
Office Area 16.925 m2 047 ASSETS OF TORUNLAR REIC / OPERATIONAL ASSETS Torunlar REIC Annual Report 2010 / 048 ASSETS OF TORUNLAR REIC / OPERATIONAL ASSETS
ANKAMALL
NUMBER OF STORES 320
LEASABLE AREA 105.421 m2
COMMON CIRCULATION AREA 41.526 m2
TOTAL CONSTRUCTION AREA 299.320 m2
CARPARK CAPACITY 6000 Vehicles
EMPLOYMENT CAPACITY 3500 people
Located at the intersection of the Istanbul and Konya highways, Ankamall is directly accessed over a pedestrian walkway that connects the Akköprü Metro Station to the shopping center. In terms of GLA, it is the largest Shopping Center of Ankara. The ANKAmall Shopping Center has a significant competitive strength in terms of its tenant mix, central location, ease of transportation, and its free- of-charge carpark that holds 6000 vehicles and 320 stores.
88,421 m2 portion of the GLA of Ankamall belongs to Yeni Gimat A.Ş., 14.83% of which is owned by Torunlar REIC.
2010 Assessment ANKAmall hosted many events throughout 2010, especially in the area of culture and the arts. The exhibition of the traditional Agriculture and Humans Photography Contest, conducted in collaboration with the Ministry of Agriculture and Rural Affairs, is one of the highlighted events.
ANKAmall diversified its operations in 2010 through its “Revenue-indexed Activities’’. One of these was the ANKAmall Campus campaign, which started in 2009 and continued into 2010 due to positive feedback from stores.
The 12-year collective rental agreement with Migros for the first phase of the ANKAmall Shopping Center ends in June 2011. Renovations in the building planned for the ensuing period are expected to significantly increase our rental income. ANKAmall is not likely to give up its position as the leading shopping center in Ankara for a long time. 049 ASSETS OF TORUNLAR REIC / OPERATIONAL ASSETS
2009 2010 VARIANCE
RENTAL INCOME (TL) 68.725.992 TL 72.041.963 TL %4,8
FOOTFALL 21.253.705 21.798.672 %2,6 Torunlar REIC Annual Report 2010 / 050 ASSETS OF TORUNLAR REIC / OPERATIONAL ASSETS
KORUPARK SHOPPING CENTER
NUMBER OF STORES 196
LEASABLE AREA 71.267 m2
COMMON CIRCULATION AREA 24.387 m2
INDOOR CARPARK AREA 63.960 m2
TOTAL CONSTRUCTION AREA 165.286 m2
CARPARK CAPACITY 2385 Vehicles
EMPLOYMENT CAPACITY 2500 People
Being opened in May 2007 as the second investment of Torunlar in Bursa, Korupark is among the top ten largest shopping centers in Turkey. It is located in the west of the city near the development axis and connections to highways. It is on the Mudanya road, which connects the city to the seashore and the Istanbul-South, Marmara-Aegean highways and ferryboat pier. It is in a luxury area adjacent to the new residential areas. The shopping center with the longest frontage to the main boulevard in Turkey, Korupark is also a mixed project. Generally, families in Bursa with socioeconomic status A or B reside in the Korupark Homes, which is considered the most prestigious residential area in Bursa. This is among the factors that increase the appeal of the shopping center. The first and second phases have been completed.
Kipa opened its first major store located in a shopping center in Turkey at Korupark, as did Electroworld, DKNY, BGN, and Arzu Kaprol. Beymen and Boyner also opened stores for the first time in the same shopping center in Turkey at Korupark. Koçtaş, Zara, Zara Home, Massimo Dutti, Pull&Bear, Bershka, Stradivarius, Douglas, C&A, Esse, Carnavalle, Tchibo and many national and international brands also opened their first stores in Bursa here. With 51% national and 46% international chain brands, 3% local brands represent a store mix that all of Turkey, and not just a region, can take as a reference.
2010 Assessment Efforts for the completion of the lightrail connection came to a conclusion with the financial support agreement made with the Bursa Metropolitan Municipality. Construction of the lightrail system started in March 2010. Although some transpor- tation problems were experienced in September 2010 due to the road being closed off in front of Korupark and the passage being diverted to auxiliary roads, there was no decrease in the number of visitors. The lightrail system, which will ensure easy access from all parts of Bursa, is going to be completed within the first half of 2011. 051 ASSETS OF TORUNLAR REIC / OPERATIONAL ASSETS
A car lottery took place in 2010 with the sponsorship of Akbank Axess credit card. Alongside the movie promotion with Cinetech, a second 3D movie theater was opened making Korupark the first shopping center with two 3D movie theaters. In addition, a 5D cinema theater was leased and opened in the 3rd bazaar floor. To make sure that Korupark is the most fun shopping center for kids and young people, we built an indoor amusement park covering 200 m2, a chess hall where national tournaments will be held, a drama school and stage.
Korupark shopping center has an occupancy rate of 98%.
2009 2010 VARIANCE
RENTAL INCOME (TL) 26.263.693 31.249.107 %19
NUMBER OF VISITORS 9.202.673 10.108.328 %9,8 Torunlar REIC Annual Report 2010 / 052 ASSETS OF TORUNLAR REIC / OPERATIONAL ASSETS
KORUPARK RESIDENCES
Korupark Residences on the Bursa-Mudanya road are a part of the mixed project along with the shopping center. Built in two separate phases, Korupark Residences are in the new development area of Bursa whose value is increasing every day.
Korupark 1st Phase Residences consist of 6 Blocks (343 units – Gross 57,119 m2). Of the 343 1st phase flats, 321 units (Gross 53,295.67 m2) were sold until 31.12.2010 and delivered to their owners. There are 22 units (Gross 3,823.33 m2) left for sale as of 31.12.2010.
Construction of Korupark 2nd Phase Residences consisting of 7 Blocks (403 units – Gross 66,721 m2) started in 2007 and has been completed. Of the 403 2nd phase units, 300 units (Gross 46,078.13 m2) were sold until 31.12.2010 and delivered to their owners. There are 103 units (Gross 20,642.87 m2) left for sale as of 31.12.2010.
The total cost of the 125 units in the 1st and 2nd phases (gross 24,466.20 m2) unsold as of, 31.12.2010 is 23,937,831 TL.
1ST AND 2ND PHASE LOT AREA 47.434,34 m2
1ST AND 2ND PHASE TOTAL OF UNITS 746
1ST PHASE CONSTRUCTION AREA 76.388 m2
2ND PHASE CONSTRUCTION AREA 89.290 m2
CARPARK AREA 40.977 m2
CARPARK CAPACITY 1.272 Vehicles
TECHNICAL SPACES 15.324 m2 053 ASSETS OF TORUNLAR REIC / OPERATIONAL ASSETS
Korupark Residences 1st and 2nd Phases Torunlar REIC Annual Report 2010 / 054 ASSETS OF TORUNLAR REIC / OPERATIONAL ASSETS
ZAFER PLAZA
NUMBER OF STORES 120
LEASABLE AREA 23.482 m2
COMMON CIRCULATION AREA 14.736 m2
TOTAL CONSTRUCTION AREA 57.112 m2
LAND AREA 9.622 m2
CARPARK CAPACITY 650 Vehicles
EMPLOYMENT CAPACITY 1.150 People
Zafer Plaza, the first shopping center in Bursa, the fifth largest city in Turkey, opened its doors in October 1999. It is located in the downtown area where the vehicle and pedestrian traffic is busiest. In order to preserve the architectural texture of the area, 6 floors were built under the street level, 3 floors for car park, and 3 for shops. The glass pyramid located in the middle of the building to daylight into the entire shopping center has become one of the symbols of the city.
Torunlar REIC owns 72.26% of Zafer Plaza’s shares, while 18.93% belong to the Bursa Metropolitan Municipality and 8.81% to various shareholders. Zafer Plaza Management A.Ş., established according to the principles of a pool protocol, manages its operations. Zafer Plaza was named the “Best Shopping Center” by the Trade Council of Shopping Centers and Retail Centers (AMDP) in 2000.
Through the renovations in 2009, we increased the total area of the shopping center from 54,000 m2 to 57,122 m2. It is located on the intermediate station of the metro, tram and other mass transport lines and annual footfall is approximately 12,000,000.
International brands such as Mango, Lacoste, Marks&Spencer, Chicco, Tommy Hilfiger, US Polo, Mothercare and more than 40 national brands including Atalar, Faik Sönmez, Paşabahçe, Kervan, Collins have opened their first stores in Bursa at Zafer Plaza.
The revisions to the store mix following the expansion project in 2009 to appeal to a younger demography increased competitive strength of the center. To fortify its position in the downtown technology market, the shopping center added the 1600 m2 Teknosa and the 750 m2 Bimeks to its store mix . Young international brands such as Alcot, Vera Moda, Jack Jones were also added. Furthermore, alternatives were increased in the foodcourt with the expansion project. 055 ASSETS OF TORUNLAR REIC / OPERATIONAL ASSETS
2010 ASSESSMENT Following the renovation and expansion of the shopping center in 2010, individual stores were also renovated in cooperation with the tenants. Among the stores that were renovated were Koton, Adil Işık, and Collins relocated to larger areas and Mavi, Atalar, and U.S. Polo.
With the expiration of their lease, movie theaters embarked on renovation as well. All the halls and lobby areas were redecorated and the number of seats and theaters were increased. They are now managed by Cinetech. The rejuvenation of the brand mix, renovation of the store decorations and focusing on technology have increased the competitive strength of Zafer Plaza.
There is also a rapid change taking place around Zafer Plaza. Since the last quarter of 2010, life started in the 2,750 housing units built as an urban transformation project 200 m away from the shopping center. Building restorations have increased the appeal of the Kükürtlü and Çekirge districts for young families, who are starting to move into the area. Also, the tram line from Cumhuriyet Boulevard to Zafer Plaza has made the shopping center more accessible.
Zafer Plaza currently operates with an occupancy rate of 98%.
2009 2010 VARIANCE
RENTAL INCOME (TL) 9.920.956 10.889.786 %9,8
FOOTFALL 11.348.692 11.624.192 %2,4 Torunlar REIC Annual Report 2010 / 056 ASSETS OF TORUNLAR REIC / OPERATIONAL ASSETS
DEEPO OUTLET CENTER
NUMBER OF STORES 90
LEASABLE AREA 18.069 m2
COMMON CIRCULATION AREA 9.500 m2
TOTAL CONSTRUCTION AREA 38.745 m2
CARPARK CAPACITY 1500 Vehicle
EMPLOYMENT CAPACITY 800 People
Deepo Outlet Center is located right across from the airport in Antalya, one of the top tourist destinations in Turkey. The center was converted from wholesale warehouses with a modern outlet concept where the climatic conditions were taken into consideration to highlight the two main galleries and facilitate shopping. Opened in 2004, Deepo Antalya is on the Isparta-Konya highway intersection, and on the route to touristic destinations such as Alanya, Manavgat and Side. The shopping center is surrounded by a concentration of commerce and business centers.
Its distance from other major cities coupled with its high touristic activity makes Antalya the right place for the sale of season’s end stocks. The increase in the success of the project every year compared to the year before has made it more appealing for many national and international brands. Out of almost 5,000,000 visitors per annum, 25% are foreign and 35% are domestic. Seasonal distributions are homogenous.
Lacoste (under the brand ‘Occasion’), and Ralph Lauren, Bebe, Seven Jean, Calvin Klein (under ‘Retry’) can only be purchased in Deepo in the region. All national and international brands such as Tommy Hilfiger, Adidas, Nike are managed by their headquarters due to the mandatory outlet concept at Deepo.
2010 Assessment Several stores were renovated in the shopping center including KRC, Occasion, Re- try, Ipekyol, Carnavalle and Saat & Saat, which joined Deepo in 2009 and 2010.
The departure boards and airlines’ check-in desks placed in the building in 2010 means that visitors can spend their time at Deepo while waiting for their flights.
The enriched amusement park and 5D cinema in the atrium area have increased the popularity of Deepo among kids and young people. Other social activities take place at the 400m2 chess club where national tournaments are held. 057 ASSETS OF TORUNLAR REIC / OPERATIONAL ASSETS
Deepo, the only mall circulating Antalya City Maps to tourists at the airport, man- aged to appear on the must-see site schedules of both domestic and foreign tourists with this initiative. Ticketed passengers can also use the shuttle service between the airport and Deepo until flight time.
Another shuttle service with a regular schedule is offered throughout the summer between the hotel zone and Deepo.
2009 2010 VARIANCE
RENTAL INCOME (TL) 11.798.517 13.349.675 %13,1
FOOTFALL 4.924.207 4.894.330 %(0,6) Torunlar REIC Annual Report 2010 / 058 ASSETS OF TORUNLAR REIC / OPERATIONAL ASSETS
NETSEL MARINA
One of Turkey’s 3 largest marinas, Marmaris Netsel Marina has a modern infrastructure that is constantly under improvement. Operated as a Torunlar REIC and Koç Group joint venture, Netsel Marina is one of the few marinas where international yachters can carry out their passport and customs procedures. More than 70 cruisers and 100,000 passengers arrive each year at the Marmaris Cruise Port that is adjacent to the Netsel Marina. Passengers who pass through the Netsel Marina on their way to Marmaris use the services and resting facilities offered by the marina. One of the largest marinas in Turkey, the 6,400m2 retail area of of Netsel offers the following:
> Migros
> 9 restaurants and bars that are distinctive and renowned venues among yachting aficionados in the Mediterranean region
> 40 stores that host national and international brands
> Amphitheater
> Laundromat
> Car park
> ATM units
> Offices belonging to yacht chartering companies and agencies are present.
Marmaris Netsel Marina has a capacity for a total of 770 boats, 720 on the sea and 50 on land.
With its unique architecture, the retail area of Netsel Marina upgraded its store mix in 2010. In addition, social events such as New Year’s Eve street parties and music festivals are organized to attract a higher number of visitors during winter months. 059 ASSETS OF TORUNLAR REIC / OPERATIONAL ASSETS
2009 2010 VARIANCE (%)
TOTAL REVENUES (TL) 12.211.101 13.183.684 %7,9
RENTAL INCOME (TL) 1.064.248 1.150.950 %8,1
OCCUPANCY (%) 58.9 68.7 16,6
061 ASSETS OF TORUNLAR REIC PROJECTS
Torunlar REIC Annual Report 2010 / 064 ASSETS OF TORUNLAR REIC / PROJECTS
MALL OF İSTANBUL
The Mall of Istanbul Project is being built next to the Mahmutbey Toll Booths located on the TEM Motorway.
Five kilometers from the Ataturk Airport, Mall of Istanbul is close to two metro lines, one of which is still in the development stage.
Mall of Istanbul was designed as Istanbul’s new lifestyle center. The total construction covers an area of 656,000 m2. The shopping center is planned to consist of a 135,000-m2 retail area with nearly 350 retail units. It is planned for the shopping center to also include restaurants, cafés, a cinema with 16 screens, an entertainment and food area of 19,500 m2, a 12,000-m2 theme park and an 8,000- m2 snow park. We aim for the project to include a residential area of 116,000-m2 , office area of 20,000-m2, and a five-star, 300-room hotel in the other parcel.
The construction permit for the project was issued on 18.03.2011; construction commenced in late March. An investment budget of $323 million was allocated for the project estimated to be completed in the second half of 2013.
PROJECT CONSTRUCTION START March 2011
PROJECT CONSTRUCTION COMPLETION 2nd Half of 2013
PROJECT CAPEX (USD) 323.000.000
LAND AREA 122.860 m2
RESIDENTIAL SELLABLE AREA 116.000 m2
MALL GROSS LEASABLE AREA 135.000 m2
OFFICE LEASABLE AREA 30.000 m2
INDOOR CARPARK AREA 201.443 m2
TOTAL CONSTRUCTION AREA 656.000 m2 065 ASSETS OF TORUNLAR REIC / PROJECTS
Torunlar REIC Annual Report 2010 / 068 ASSETS OF TORUNLAR REIC / PROJECTS
ALİ SAMİ YEN PROJECT
GROSS LOT AREA 34.640 m2
RESIDENTIAL AREA 86.121 m2
OFFICE AREA 73.849 m2
RETAIL AREA 23.259 m2
TOTAL CARPARK AREA 84.169 m2
TOTAL CONSTRUCTION AREA 240.000 m2
The project is being prepared for the former Ali Sami Yen Stadium lot in Mecidiyeköy, Istanbul as a joint venture of the Torunlar-Aşçıoğlu-Kapıcıoğlu partnership where Torunlar REIC owns 65% of the shares.
The project, spread over a construction area of over 200,000 m2, consists of 3 car parks and 3 blocks. Two of these are residential blocks with 43 floors, while the third block is a 39-floor Grade-A office building. Blocks were designed in different positions on the lot, inspired from the concept of “tropism” which means that plants orient themselves towards the sun. With this design, all the facades of the three blocks will have different panoramic views of the city from the Bosphorus to the Marmara Sea. Equipped with all the necessities of modern life, the residential units all have a magnificent view of Istanbul and come in varying surface areas, from 1+1 to 4+1 with a magnificent view.
Mecidiyeköy will have a modern city square with this project to be built on the former Ali Sami Yen Stadium lot. A symbol that immortalizes Ali Sami Yen will be included in the plans for the square.
Areas below the ground floor are planned as office floors with gardens and terraces. The lobby of the project is designed as a city square with restaurants and cafés of 10,000 m2. On the other side, the outdoor shopping street located on the west side of the project is planned to increase the integration of the project with the city. 069 ASSETS OF TORUNLAR REIC / PROJECTS Torunlar REIC Annual Report 2010 / 070 ASSETS OF TORUNLAR REIC / PROJECTS
TORUN TOWER
Torun Tower is located on the main road over Büyükdere Boulevard in Şişli, downtown Istanbul. Torun Tower is easily accessible by car, by bus and minutes away from the Gayrettepe-Esentepe metro station.
Our company aims for Torun Tower to be a Grade-A office project. Torun Tower targeted to be built on a construction area of 92,899 m2, is planned to consist of a tower with 35 storey. The land for construction belongs to Torunlar REIC. Class-A offices are planned to cover an area of 44,760 m2, underground offices an area of 8,000 m2 and retail units an area of 2,415 m2.
Grade-A offices will be located on the ground, whereas offices enriched with gardens and retail areas and meeting areas will be located underground. 071 ASSETS OF TORUNLAR REIC / PROJECTS Torunlar REIC Annual Report 2010 / 072 ASSETS OF TORUNLAR REIC / PROJECTS
KORUPARK TERRACE
The project of Korupark Terrace is on the land adjacent to the Korupark Shopping Center and Korupark Residences.
The construction of Korupark Terrace Residences, planned to consist of 7 blocks and 680 residential units will commence in 2011.
With unit types varying from 1+1 to 4+1, the project consists of units facing interior landscaping, with high and low block options available. Deliveries of the project that has a residential area of 102,000 m2, are planned for November 2012.
KORUPARK TERRACE LAND AREA 35.618,08 m2
KORUPARK TERRACE RESIDENTIAL UNITS 680
KORUPARK TERRACE CONSTRUCTION AREA 166.452 m2
KORUPARK TERRACE CARPARK CAPACITY 1.146 Vehicles 073 ASSETS OF TORUNLAR REIC / PROJECTS Torunlar REIC Annual Report 2010 / 074 ASSETS OF TORUNLAR REIC / PROJECTS
BULVAR SAMSUN SHOPPING CENTER
Bulvar Samsun Shopping Center will be erected on the land of an old cigarette factory in Samsun. Through its shares in the TTA Real Estate Investment and Management A.Ş., Torunlar REIC owns 40% shares in the project. The other shareholder of the project is Turkmall Real Estate. The land is being developed under leasing rights provided by the municipality. With a GLA of 14,943 m2 and on a lot of 17,401 m2, Bulvar Samsun Shopping Center will be the first shopping center in downtown Samsun.
The shopping center is located south of downtown, surrounded by residential and commercial buildings. Being converted by the restoration of the old cigarette factory warehouses, the project is located between the two main squares where many modern stores are active and the lot is easily accessible from the highways and connection roads. 075 FINANCIAL RESULTS AND ASSESSMENT Torunlar REIC Annual Report 2010 / 076 FINANCIAL RESULTS AND ASSESSMENT
BALANCE SHEET (‘000 TL) 2009 2010 Total Assets Current Assets 250,631 579,781 Cash and cash equivalents 72,639 438,644 Inventories 101,648 51,769 Other current assets 76,344 89,368 Non-current assets 2,259,156 2,624,058 Investment in associates 115,478 125,458 Investment property 2,096,430 2,388,865 Property,plant and equipment 407 1,115 Inventories – Other non-current assets 46,841 108,62 Total assets 2,509,787 3,203,839 Total liabilities and aquity Current liabilities 241,733 282,544 Financial liabilities 157,676 231,141 Bank borrowings 155,694 231,141 Due to related parties 1,982 Other current liabilities 84,057 51,403 Non-current liabilities 462,886 552,212 Financial liabilities 462,881 552,122 Other non-current liabilities 5 90 Total equity 1,805,168 2,369,083 Total liabilities and equity 2,509,787 3,203,839
INCOME STATEMENT Net revenues 120.158 232,928 % growth (10.9%) 93,9% Residence sales 65.380 160,585 Mall rental revenues 39.859 58,584 Other revenues 14.919 13,759 Cost of sales -45.183 -152,910 Gross profit 74.975 80,018 Operating expenses -8.014 -29,040 Other income/(expenses) 488,167 166,131 Net gain from fair value adjustments on investment property 488.159 166,660 Operating profit/(loss) 555,128 217,109 Operating profit/(loss) excl.fair value adjustment gains 66.969 50,449 Dividend received from associates (recurring) 4.536 4.745 EBIT 71.505 55,194 margin % 59.5% 23,7% EBITDA’ 71.700 55,377 % growth 14.3% -22.8% % margin 59.7% 23.8% Share of profit from associates (non-recurring) 2.704 9.980 Net financial interest income (expense) -25.433 20,975 Other net financial income (expense) -1.294 1,098 Valuation gain from financial assets and liabilities -2.251 3,562 Profit before tax 535,641 215,519 Tax expense (1,274) Net profit, excl. fair value adjustment gains 49.733 44,023 Net profit 535,641 214,245 077 FINANCIAL RESULTS AND ASSESSMENT
Total assets amounting to 2,509,787 thousand TL on 31.12.2009 increased by %27.6 as of 31.12.2010 to 3.203,839 thousand TL. The ratio of equity to total assets was 74% and the ratio of liabilities to assets was around 26%. 74.5% of the company’s assets consist of investment property and 13.6% of cash and cash equivalents.
Investment property is measured at fair value. Change in value of investment property as compared to 2009 was 13.9%. The most important investment properties are the Mall of Istanbul lot with a value of 645.7 million TL, Torium Shopping Centers and Residential Units with 549.8 million TL, Bursa Korupark Shopping Center with 540.5 million TL, Torun Tower lot with 237.7 million TL and Bursa Zafer Plaza Shopping Center with 143.1 million TL. Until the revision in its zoning plans is completed, Antalya Deepo Shopping Center, valued at 180.4 million TL, was transferred to TRN Shopping Centers Investment and Management A.Ş. on 31.03.2010 by partial spin-off. 69.8 million TL of the value increase compared to the previous year is from the Torun Tower lot, 55.1 million TL from the Antalya Deepo Shopping Center and 42.7 million TL from the Torium Shopping Center and Maturity Structure of Financial Loans (Million TL) Residences.
400 Liquid assets showed an increase of 503.8%, driven by IPO proceeds and rose to 438.6 million TL. 188.8 million TL of this is held in foreign exchange currency
31 4 deposits. 300
231 Inventory consisting of lots and residential units decreased in comparison to 2009
200 by 49.1% to fall to 51.8 million TL. The sales of 621 out of 746 units in the Bursa Korupark Residences 1st and 2nd Phases were completed. 14 2
100 96 On the liabilities side, previous year’s profits are the most important item at 1.6 trillion TL within equity. In addition, the company’s bank loans increased by 26.6% 0 compared to the previous year to 783.2 million TL. These loans were used for the financing of Torium Shopping Center, Torun Tower Office Project and Bursa Korupark 2011 2012 2013 2014 Shopping Center. 70.4% of the loans are long term. 62.7% are in USD, 34.8% are in Euro, and the remaining are TL loans. The breakdown of these loans is 317.7 million USD, 133.3 million Euros and 19.1 million TL. 231.1 million TL of the loans will be repaid in 2011. The weighted average effective interest rate is 5.22%. The net foreign currency position deficit of our company is 551.2 million TL. Against this, 60% of the rent income derived from shopping centers is in Euros and 36% is in USD. Our company has performed 264.4 million TL worth of swap transactions in order to fix interest payments indexed to Euribor.
The composition of our real estate portfolio directly impacts the amount of revenue we generate in a given financial period and the expected duration of revenue generated from specific projects. We generally expect to receive consistent rental income from our shopping malls, subject occupancy levels, rental rate levels and the prevailing economic environment. Torunlar REIC Annual Report 2010 / 078 FINANCIAL RESULTS AND ASSESSMENT
In addition to occupancy levels, the most important factor that affects rental income is the rental rates that the company is able to charge. The substantial majority of the lease contracts with tenants provide for fixed rents, but also include turnover provisions pursuant to which tenants are required to pay a proportion of their monthly turnover if the fixed rent is less than a certain proportion of the turnover. The lease agreements are typically for a term of five years and provide for 2% to 3% annual increases in the fixed rent amounts to adjust for annual inflation.. Rental rates vary depending on tenant and unit type and are generally determined based on rental rates for similar properties in the applicable market. Rental rates are dependent on general economic factors such as inflation rates, interest rates and employment trends, as well as local conditions such as supply and demand levels, attractiveness of the shopping mall to the tenants, the quality of management and competition from other available shopping centers.
In residential projects, because title to a substantial majority of residential units comprising a specific housing project typically transfers to the purchasers over a relatively short period of time upon project completion, revenues from residential sales are generally concentrated within one or two financial periods. Consequently, the revenues of the company and results of operations may vary significantly from period to period, depending on the number of residential projects that are sold and delivered in each such period as well as variations in prices in the residential real estate market.
While net sales amounted to 120.1 million TL during the year ended December 31st, 2009, they increased by 93.9% during the year ended December 31st, 2010 to 232.9 million TL. 68.9% of this is attributable to residential , with 25.1% to shopping centers and the rest to other revenues. The NishIstanbul project completed in 2010 provided residential sales of 119.4 million TL, as this project made up 51.2% of the total revenues. Torium Shopping Center that opened at the end of October 2010 made a contribution of 9.3 million TL in income.
Cost of revenues attributable to residential projects consist of land, development and construction costs. Cost of sales of the company that can be attributed to residential housing projects amounted to 34.5 million TL on December 31st, 2009 and 121.7 million TL on December 31st, 2010 respectively. These make up 79.5% of cost of sales. Land, development and construction costs related to shopping malls are capitalized on the balance sheet and shopping malls are carried at fair value and to the extent sold, a corresponding gain or loss on sale is recognized.
While gross profit margin was 62.4% in 2009, it went down to 34.3% in 2010.
General administrative expenses increased by 557% as compared to the previous year to reach 23.5 million TL. This increase was primarily attributable to 10.8 million TL one-off IPO costs, royalty payment made to the Bursa Municipality of 4.1 million TL and 0.9 million TL consulting costs. While tax, duties and fees of 5 million TL accrued owing to the increase in real estate property values, personnel expenses increased to 1.5 million TL due to the increase in the staff.
Sales and marketing expenses of 5.5 million TL consist of advertising and marketing expenses accrued for residential sales. 079 FINANCIAL RESULTS AND ASSESSMENT
Defined as (gross profit-general administrative expenses-marketing expenses+dividend+other operational income-other operational expenses+ depreciation), the company’s EBITDA (earnings before interest, taxes, depreciation and amortization) amounts to 55.4 million TL. The EBITDA margin decreased from 59.7% to 23.8% due to decrease in gross profit margin and one-off costs.
Net gains from fair value adjustments on investment property decreased from 488.1 million TL to 166 million TL. The reason for this is that the major fair value increase observed in the Torium and Mall of Istanbul land in 2009 took place at a lower level in 2010. While a major value increase was seen in Torun Tower and Antalya Deepo land, Bursa Korupark Shopping Center lost value.
The fair value adjustment gains that made up 91.1% of the company’s net profit accounted for 77.7% in 2010.
Despite the positive contribution of the interest income from liquid assets valued as deposits and the reduction of interest rates through the swap transaction, net profit was 60% lower than last year at 214.2 million TL.
2009 2010 Leverage (Ratio of financial loans in assets %) 24.7 24.4
Average Interest (year) (%) 5.35 5.22
Average maturity (year) 5
Interest coverage ratio (times) 2.8 2.6
Ratio of fixed interest loans 46.1 66.2
Number of staff 14 34
EXPECTATIONS FOR THE FUTURE
The company will capitalize on its expertise to further extract operational efficiency from its shopping malls under its management.
The construction of a major part of our projects will start this year and be completed in the 2013-2014 period. Total sales in 2011 are expected to reach 150 million TL, 40% of which is derived from residential sales.
There will be no new opening or project delivery taking place in 2011. The majority of the sales revenues will come from shopping centers including Torium, which will operate full year.
EBITDA is expected to reach 90 million TL in 2011. Torunlar REIC Annual Report 2010 / 080 FINANCIAL RESULTS AND ASSESSMENT
For the upcoming years, 10% annual LFL growth is forecast in rental revenues. The company will chase further acquisition opportunities with is favorable cash position.
GLA+GSA (*) (m2) 2010 2011 2012 2013 2014
Retail 214.697 214.697 246.943 381.943 395.813
Residential 31.081 31.081 31.081 249.906 305.884
Office 2.964 2.964 3.345 78.105 131.876
Hotel 2.907 2.907 2.907 2.907 2.907
Marina 2.984 2.984 2.984 2.984 2.984
Other 15.599 15.599 15.599 18.014 18.014
Total 270.232 270.232 302.859 733.859 857.478
Land 56.893 56.893 56.893 56.893 56.893 (*) GLA: Gross Leasable Area GSA: Gross Sellable Area
GLA Breakdown by City
2010
%46 BURSA
%40 İSTANBUL
%7 ANTALYA
%6 ANKARA
%1 MUĞLA
2014
%70 İSTANBUL
%22 BURSA
%5 ANTALYA
%2 ANKARA
%1 SAMSUN
%0 MUĞLA 081 SOCIAL RESPONSIBILITY PROJECTS Torunlar REIC Annual Report 2010 / 082 SOCIAL RESPONSIBILITY PROJECTS
Turkey’s Brands Dress In 2010 Torunlar REIC supported the campaign named “Turkey’s Brands Dress Turkey’s Children” organized by the United Brands Association. Aiming to provide Turkey’s Children clothing aid to 100,000 children in need of assistance in the provinces of Diyarbakır, Van, Mardin, Çankırı, Gümüşhane and Istanbul’s Pendik, Sultangazi, Esenyurt, Zeytinburnu and Sultanbeyli districts; one of the campaign’s objectives was to attempt to close the gap between the East and the West of Turkey. The truck that left on October 4th, 2010 reached its destination before the holiday and the boxes containing a jacket, shirt, trousers, a pair of shoes and socks, were prepared individually and distributed to their owners. Goods worth of 20 million TL were distributed during the campaign.
Retail Days In 2010 Torunlar REIC supported the 10th Retail Days , a significant event for the development of the retail sector in Turkey and an opportunity to catch up with Mike Gatti Session global trends. Torunlar REIC contributed to the sector by supporting Mike Gatti’s session, “Striking Applications from American Retail” that drew much interest.
Smile Mom 30 successful and famous mothers from Bursa, posing for cameras in a special studio set up at Korupark Shopping Center, fulfilled their personal responsibilities on the one side, while also providing support for the Turkish Mothers Association student scholarship fund. The income obtained from the project held by Korupark Shopping Center was transferred to the Bursa Branch of the Mother’s Association. The photographs taken were displayed at Korupark between May 4 and 26, 2010. 083 SOCIAL RESPONSIBILITY PROJECTS
Turkish – Russian Organized by Deepo Outlet Center and aiming to reinforce the friendship ties between Russians living in Antalya and Turks, the festival ensured rapprochement Friendship Festival between the cultures as the year came to a close.
You and Paws During the project held by Zafer Plaza jointly with the Bursa Branch of the Animal Protection Society of Turkey, photographs of the leading figures of Bursa taken with stray cats and dogs were offered for sale and the revenues were granted to the Society.
Auction to Support Hundreds of valuable works of art were offered for sale, at an auction held by Korupark Shopping Center in cooperation with the Bursa Nilüfer Lions Club on June Women’s Shelter 16th, with the participation of Semra Özal. Revenues from the public auction, held for the first time in Bursa, were granted to the women’s shelter. Torunlar REIC Annual Report 2010 / 084 SOCIAL RESPONSIBILITY PROJECTS
Bursa Classic Bursa Classic Automobile Rally started at Korupark with the participation of Burhan Öcal for children infected with cancer. The event, held for the first time Automobile Tour in Bursa, gave hope to cancer patients. Medical instruments were purchased to Uludağ University Medical Faculty Hospital with the revenues obtained through the event.
Santa Clauses Wanted With the “Santa Clauses Wanted / Take a Wish from the Tree” project being held with Hürriyet Bursa and Radyoaktif by Korupark Shopping Center, wishes of children in need of assistance hung on a pine tree placed in middle square at Korupark Shopping Center, came true with the contribution of Korupark visitors. 085 INDEPENDENT AUDITOR’S REPORT TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2010 TOGETHER WITH INDEPENDENT AUDITOR’S REPORT (ORIGINALLY ISSUED IN TURKISH) INDEPENDENT AUDITOR’S REPORT
To the Board of Directors of Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş.
1. We have audited the accompanying consolidated financial statements of Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. and its subsidiaries (collectively referred to as the “Group”) which comprise the consolidated balance sheet as of 31 December 2010 and the consolidated statement of compehensive income, changes in equity and cash flows for the year then ended and a summary of significant accounting policies and other explanatory notes.
Management’s Responsibility for the Financial Statements
2. The Group management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with the financial reporting standards issued by the Capital Markets Board (“CMB”). This responsibility includes: designing, implementing and maintaining internal control relevant to the proper preparation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditor’s Responsibility
3. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with the auditing standards issued by the CMB. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance on whether the consolidated financial statements are free from material misstatement.
An audit involves performing audit procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Group’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion
4. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. as of 31 December 2010, and of its financial performance and its cash flows for the year then ended in accordance with the financial reporting standards issued by the CMB (Note 2).
Başaran Nas Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. a member of PricewaterhouseCoopers
Haluk Yalçın, SMMM Sorumlu Ortak Başdenetçi
İstanbul, 7 Nisan 2011 TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2010
CONTENT PAGE CONSOLIDATED BALANCE SHEETS ...... 1
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME...... 2
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY ...... 3
CONSOLIDATED STATEMENTS OF CASH FLOW ...... 4
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ...... 5-68
NOTE 1 COMPANY’S ORGANISATION AND NATURE OF OPERATIONS ...... 5-8 NOTE 2 BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS...... 9-28 NOTE 3 SEGMENT REPORTING ...... 29 NOTE 4 CASH AND CASH EQUIVALENTS ...... 30 NOTE 5 FINANCIAL LIABILITIES ...... 31-33 NOTE 6 OTHER FINANCIAL LIABILITIES ...... 33 NOTE 7 TRADE RECEIVABLES AND PAYABLES ...... 34-35 NOTE 8 INVESTMENT PROPERTIES ...... 36-37 NOTE 9 INVENTORIES ...... 37-38 NOTE 10 PROPERTY, PLANT AND EQUIPMENT ...... 39 NOTE 11 OTHER ASSETS AND LIABILITIES ...... 40 NOTE 12 INVESTMENTS IN ASSOCIATES ...... 41 NOTE 13 GOODWILL ...... 41 NOTE 14 COMMITMENTS, CONTINGENT ASSETS AND LIABILITIES ...... 42-43 NOTE 15 EQUITY ...... 43-45 NOTE 16 REVENUES AND COST OF REVENUE 46 NOTE 17 MARKETING, SELLING AND DISTRIBUTION 47 EXPENSES, GENERAL ADMINISTRATIVE EXPENSES...... 48 NOTE 18 EXPENSES BY NATURE ...... 48 NOTE 19 OTHER INCOME/EXPENSES ...... 49 NOTE 20 FINANCIAL INCOME/EXPENSES ...... 49 NOTE 21 EARNINGS PER SHARE ...... 50 NOTE 22 TAX ASSETS AND LIABILITIES ...... 50-53 NOTE 23 BALANCES AND TRANSACTIONS WITH RELATED PARTIES ...... 53-65 NOTE 24 FINANCIAL RISK MANAGEMENT ...... 65-66 NOTE 25 FINANCIAL INSTRUMENTS ...... 66 NOTE 26 SUBSEQUENT EVENTS ...... NOTE 27 OTHER ISSUES THAT SIGNIFICANTLY AFFECT THE FINANCIAL STATEMENTS OR OTHER ISSUES REQUIRED FOR THE CLEAR UNDERSTANDING OF FINANCIAL STATEMENTS...... 67-68 TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. CONSOLIDATED BALANCE SHEETS AT 31 DECEMBER 2010 AND 2009 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)
Notes 31 December 31 December 2010 2009
ASSETS
Current assets 579.781 250.631
Cash and cash equivalents 4 438.664 72.639 Trade receivables 7 49.706 74.668 Receivables from related parties 23 35.417 52.137 Receivables from third parties 7 14.289 22.531 Inventories 9 51.769 101.648 Other current assets 11 39.642 1.676
Non-current assets 2.624.058 2.259.156
Financial investments 5 29.459 - Trade receivables 7 4.729 7.469 Receivables from related parties 23 - 2.159 Receivables from third parties 7 4.729 5.310 Investments in associates 12 125.458 115.478 Investment property 8 2.388.865 2.096.430 Tangible fixed assets 10 1.115 407 Intangible fixed assets 82 - Goodwill 13 - 8.250 Other non-current assets 11 74.350 31.122
Total assets 3.203.839 2.509.787
LIABILITIES AND EQUITY
Current liabilities 282.544 241.733
Financial liabilities 231.141 157.676 Bank borrowings 5 231.141 155.694 Due to related parties 23 - 1.982 Finance lease liabilities 5 20 1.639 Other financial liabilities 6 3.877 4.846 Trade payables 7 34.536 8.619 Due to related parties 23 3.501 7 Due to third parties 7 31.035 8.612 Other current liabilities 11 12.970 68.953
Non-current liabilities 552.212 462.886
Financial liabilities 5 552.122 462.858 Finance lease liabilities 5 - 23 Provision for employment termination benefits 90 5
Total equity 2.369.083 1.805.168
Share capital 15 224.000 176.100 Share premium 15 301.770 - Restricted reserves 15 3.127 3.127 Retained earnings 15 1.625.941 1.090.300 Net profit of the year 15 214.245 535.641
Total liabilities and equity 3.203.839 2.509.787
The accompanying notes form an integral part of these consolidated financial statements. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED 31 DECEMBER 2010 AND 2009 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)
Notes 31 December 31 December 2010 2009 Revenues 16 232.928 120.158 Cost of revenues 16 (152.910) (45.183)
Gross profit 80.018 74.975
General administrative expenses (-) 17 (23.498) (3.577) Marketing, selling and distribution expenses (-) 17 (5.542) (4.437) Net gain from fair value adjustments on investment property 19 166.660 488.159 Other income 19 540 274 Other expenses (-) 19 (1.069) (266)
Operating profit 217.109 555.128
Share of profit of associates accounted under equity method 12 14.725 7.240 Financial income 20 23.077 13.595 Financial expenses (-) 20 (39.392 (40.322)
Profit before tax from continuing operations 215.519 535.641
Tax expense from continuing operations 22 (1.274) -
Profit for the year from continuing operations 214.245 535.641
Other comprehensive income - -
Total comprehensive income 214.245 535.641
Earnings per share in full TL 21 1,16 3,04
The accompanying notes form an integral part of these consolidated financial statements. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED 31 DECEMBER 2010 AND 2009 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)
Share Share Restricted Retained Net Income Total Capital Premium Reserves Earnings for the year Equity 31 December 2008 176.100 - 3.127 1.037.573 52.727 1.269.527
1 January 2009 176.100 - 3.127 1.037.573 52.727 1.269.527
Transfers - - - 52.727 (52.727) - Total comprehensive income - - - - 535.641 535.641
31 December 2009 176.100 - 3.127 1.090.300 535.641 1.805.168
1 January 2010 176.100 - 3.127 1.090.300 535.641 1.805.168
Transfers - - - 535.641 (535.641) - Capital contributions 47.900 301.770 - - - 349.670 Total comprehensive income - - - - 214.245 214.245
31 December 2010 224.000 301.770 3.127 1.625.941 214.245 2.369.083
The accompanying notes form an integral part of these consolidated financial statements. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED 31 DECEMBER 2010 AND 2009 (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.) Notes 31 December 31 December 2010 2009 Cash flows from operating activities: Total comprehensive income 214.245 535.641
Adjustments to reconcile net cash generated from operating activities to income before tax:
Taxation 1.274 - Net gain from fair value adjustment on investment property 8,19 (166.660 (488.159) Unrealised foreign exchange losses 4.804 4.762 Interest income 20 (18.233) (7.792) Interest expense 20 39.208 33.225 Depreciation 18 183 195 Provision for employment termination benefits 85 (12) Income from sale of property, plant and equipment - (81) Other financial income / (expenses) 20 (129) (1.476) Share of profit of associates (14.725) (7.240) accounted under equity method 12 85 - Provision expense for doubtful receivables 7 - (4.327) Gain on disposal of associate (969) 4.846 Loss on derivative financial instruments 20 8.250 - Goodwill transferred to income statement
Net cash before changes in assets and liabilities: 67.418 69.582
Changes in working capital:
Change in receivables from related parties 18.879 (14.350) Change in payables to related parties 3.494 (8.478) Change in inventories 49.879 (29.022) Change in trade receivables 8.738 (12.926) Change in trade payables 22.423 1.901 Change in other assets (81.194) 9.821 Change in other liabilities (56.424 46.759 Taxes paid (833) -
Net cash used in operating activities 32.380 63.287
Purchase of investment property 8 (131.682) (67.461) Disposal of investment property 8 4.179 - Transfer of investment property 8 1.728 - Purchase of tangible assets (874) (400) Cash provided from sale of property, plant and equipment - 508 Purchase of intangible assets (98) - Dividends received from associates 12 4.745 4.536 Cash provided from disposal of associate - 4.327
Net cash used in investing activities (122.002) (58.490)
Increase in financial investment (29.459) - Interest paid (26.978) (21.675) Increase in bank borrowings 281.031 275.184 Decrease)/increase in due to related parties 1.982 (3.551) Bank borrowings paid (120.919) (262.073) Capital increase and share premium 349.670 -
Net cash generated from /(used in) financing activities 455.327 (12.115)
Net increase/(decrease) in cash and cash equivalents 365.705 (7.318)
Cash and cash equivalents at beginning of the year 4 72.639 80.168
Exchange losses on cash and cash equivalents 320 (211)
Blocked deposits (121.447) - Cash and cash equivalents at end of the period 4 317.217 72.639
The accompanying notes form an integral part of these consolidated financial statements. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 1 - COMPANY’S ORGANISATION AND NATURE OF OPERATIONS
Torunlar Gayrimenkul Yatırım Ortaklığı Anonim Şirketi (“Torunlar REIC” or “the Company”) has been incorporated on 20 September 1996, which was registered as Toray İnşaat Sanayi ve Ticaret A.Ş. in İstanbul, Turkey. With a change in the Articles of Association published on Trade Registry Gazette on 25 January 2008, the Company has been converted into Real Estate Investment Company (“REIC”) with the trade name Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. and was registered on 21 January 2008. As of 31 December 2010, the total number of employees of Torunlar REIC, its Subsidiaries, Joint Ventures and Associates (together referred as the “Group”) is 132 (31 December 2009: 88). Total number of employees of Torunlar REIC is 34 (31 December 2009:14) and the ultimate shareholders of Torunlar REIC are the Torun family members (Note 15).
The Company is registered in İstanbul Trade Registry Office in Turkey in the below address: Rüzgarlıbahçe 95. Sokak No:6 Kavacık 34805 İstanbul / Türkiye
As per Articles of Association, the Company shall operate within the scope of the Company’s real estate portfolio, make changes in the portfolio when necessary, minimize investment risk through diversifying the Company’s portfolio, monitor developments related to real estate, transactions based on real estate and securities, take necessary precautions for portfolio management, conduct research for preserving and increasing the portfolio value, as per the REIC Communique published by the Capital Markets Board of Turkey (“CMB”).
Subsidiaries
The Subsidiaries of Torunlar REIC operate in Turkey and the natures of their business are as follows (Note 2):
Subsidiary Nature of Business
Toray İnşaat Danış Yapı Adi Ortaklığı (“Toray Danış”) Construction/Subcontractor
TRN Alışveriş Merkezleri Real Estate Project Yatırım ve Yönetim A.Ş. (“TRN”) Development and Management Toray Danış
The Subsidiary has been incorporated as an ordinary partnership between Torunlar REIC and Danış Yapı Madencilik Nakliyat Petrol Gıda Oto Tamiri ve Yedek Parça Sanayi ve Ticaret Ltd. Şti. on 9 October 2007, for the use of land situated in İstanbul Küçükçekmece Kayabaşı, which has been awarded by a tender of the Housing Development Administration of Turkey (“TOKİ”) to the ordinary partnership for the use of the land as the excavation molding area. The aforementioned land is leased by Torun Yapı Sanayi ve Ticaret A.Ş. (“Torun Yapı”) - a related party - for the excavation works of Mall of İstanbul project. The liquidation application for Toray Danışmanlık has started on 31 March 2011 and it will be liquidated until the half of 2011. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 1 - COMPANY’S ORGANISATION AND NATURE OF OPERATIONS (Continued)
TRN
In accordance with the Extraordinary General Assembly Meeting held on 9 March 2010, the Company has transferred Antalya Deepo AVM located in Antalya City, Centre County, Koyunlar Village which was unfavourable to retain in investment portfolio with respect to its current situation, to a newly incorporated subsidiary of the Company, TRN Alışveriş Merkezleri Yatırım ve Yönetim A.Ş. (“TRN”) by “partial split”. Additionally, the immovables located in Antalya city Koyunlar village, which are not included in the shopping mall concept, however considered to be useful to conserve the integrity of the concept and to enable utilising additional projects related with future potential parcellation plan are also transferred to TRN. The incorporation of TRN was approved by İstanbul Commercial Department as at 31 March 2010. Joint Ventures
The joint ventures of Torunlar REIC operate in Turkey and the nature of their business, the business segment and joint venture partners are as follows (Note 2):
Joint venture Nature of business Joint venture partner
Torunlar Özyazıcı Real estate projects Özyazıcı İnşaat Elektrik, Makine, Proje Ortaklığı (“Torunlar Özyazıcı”) Müşavirlik ve Taah. Ltd. Şti.
Turkmall Gayrimenkul Geliştirme TTA Gayrimenkul Yatırım Geliştirme Shopping mall and Yönetim ve Yatırım A.Ş. ve Yönetim A.Ş.(“TTA”) hotel project Turkmall Market Yatırım İnşaat ve Ticaret A.Ş.
Torunlar Aşçıoğlu Kapıcıoğlu Aşçıoğlu İnşaat Taah. Turizm Proje Ortaklığı (“Torunlar Aşçıoğlu Kapıcıoğlu”) Real estate projects Ticaret A.Ş. projesi Kapıcıoğlu İnşaat Sanayii ve Ticaret A.Ş.
Torunlar Özyazıcı
Torunlar Özyazıcı has been incorporated as an ordinary partnership with a joint venture agreement on 26 January 2009. The subject of the joint venture is to conduct construction and sales of the housing development project Nishistanbul in Yenibosna İstanbul. This project includes 63 offices, 585 residences and 52 shops in 4 blocks with 17 stores. As of 31 December 2010, the construction has been completed. 560 residence, 58 offices and 18 shops have been sold and actually delivered.
In accordance with the revenue sharing agreement signed between Torunlar Özyazıcı and land owner of the project, 31% of total project revenues will be distributed to the land owner and the remaining 69% portion will be divided to the joint venturers as 60% Torunlar REIC and 40% Özyazıcı İnşaat Elektrik, Makine, Müşavirlik ve Taah. Ltd. Şti.. After the completion of the project, it is planned to be liquidated within the first half of 2011. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 1 - COMPANY’S ORGANISATION AND NATURE OF OPERATIONS (Continued)
TTA
TTA Gayrimenkul Yatırım ve Yönetim A.Ş. has been incorporated at 7 January 2010 following the win of the tender related with the old cigarette factory and its auxiliary buildings which are located in Samsun, İlkadım district, 205 lot, 2,8,9,10,11,12,13,14 parcels and 376 lot, 1 parcel and 377 lot, 5 parcel whose ownership is registered to Samsun Metropolitan Municipality. The project includes, by the approval of Samsun Cultural and Natural Heritage Protection Regional Committee; the renovation as shopping mall and/or hotel; constructing two storey underground car park and facilitating the right of operation to Samsun Metropolitan Municipality; operating for 30 years with a limited incorporeal right (permanent and individual usufruct right) on land registry by the same term and providing a certain share of the revenue of shopping mall and/or hotel to Samsun Metropolitan Municipality; delivering the project to Samsun Metropolitan Municipality at the end of the 30 year term.
The shareholding structure of TTA is as 40% of Torunlar GYO, 5% Torunlar Gıda Sanayi Ticaret A.Ş., 5% Torun Family, 34% Turkmall Gayrimenkul Geliştirme Yönetim ve Yatırım A.Ş., 11% Turkmall Market Yatırım İnşaat ve Ticaret A.Ş. and 5% Ahmet Demir.
Torunlar Aşçıoğlu Kapıcıoğlu Project Partnership
The joint venture group including the Company has won the tender regarding the income sharing project in exchange of the sale of the land on which Ali Sami Yen Stadium is located. The land is located on the land in Dikilitaş Neighborhood, Şişli District, İstanbul Province located in the Plate 58, Block 1199, Lot 384. The Project that will be applied on the land comprised touristic and commercial real estate developments as well as recreational area and the costs of construction is to be borne Torunlar Aşçıoğlu Kapıcıoğlu Project Partnership. For this purpose, Torunlar Aşçıoğlu Kapıcıoğlu Project Partnership has been formed on 18 October 2010. The partnership shares are as follows: 65% Torunlar REIC, 35% Aşçıoğlu A.Ş. and 5% Kapıcıoğlu A.Ş.. An Income Sharing in Exchange of the Sale of Land contract has been signed with The Republic of Turkey Prime Ministry Housing Development Administration of Turkey on 10 November 2010 in the scope of the mentioned Project (Note 27).
Associates
The Associates of Torunlar REIC are incorporated in Turkey and their primary operations and nature of businesses are stated below:
Associate Nature of business
Yeni Gimat İşyerleri İşletmesi A.Ş. (“Yeni Gimat”) Owner of Ankamall and Crowne Plaza Hotel
Netsel Turizm Yatırımları A.Ş. (“Netsel”) Management of Marmaris Marina
Nokta İnşaat Yatırım Turizm Sanayi ve Ticaret A.Ş. (“Nokta İnşaat”) Construction/Subcontractor TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 1 - COMPANY’S ORGANISATION AND NATURE OF OPERATIONS (Continued)
Yeni Gimat
Yeni Gimat has been incorporated by participation of 1,050 individual shareholders as founding members on 30 July 1999. The entity owns Ankamall Shopping Mall since 2006 and Ankara Crowne Plaza Hotel since 2007. The number of shareholders that is A group (nominative) of Yeni Gimat is 927 as of 31 December 2010.(31 December 2009:1073). The Company owns 14.83% of Yeni Gimat shares and Torunlar family member who also own another 5% of Yeni Gimat and as a result the Company has significant influence on Yeni Gimat and is also represented on Board of Directors. The investment in Yeni Gimat is accounted for by equity method in the consolidated financial statements.
Netsel
Netsel has been incorporated by Net Turizm Ticaret and Sanayi A.Ş. and Yüksel İnşaat A.Ş. on 6 October 1987. The coastal property operated by Netsel, has been leased from Ministry of Culture and Tourism for 49 years on 22 December 1988. Net Turizm sold its shares to Marmara Bank on 1992 and Yüksel İnşaat sold its shares to Çukurova Group in 1994. Following the liquidation process of Marmara Bank, 44.60% of Netsel has been sold to Torunlar REIC in accordance with share transfer agreements on 31 May 2005 and 7 June 2005 respectively and 55% of Netsel has been transferred to Tek-Art Kalamış and Fenerbahçe Marmara Turizm Tesisleri A.Ş. (a subsidiary of Koç Holding A.Ş.) in accordance with share transfer agreement on 22 August 2005 as a privatisation transaction. The remaining part amounting 0.40% belongs to Torun family.
Nokta İnşaat
Nokta İnşaat has been incorporated on 22 February 1983, and registered as Hasel Özden Halı Ticaret A.Ş. It changed its commercial title to “Hayat İnşaat Yatırım A.Ş.” in 1995 and to “Hayat İnşaat Yatırım ve Taahhüt A.Ş.” in 2006 respectively and finally on 21 May 2007, to “Nokta İnşaat Yatırım Turizm Sanayi ve Ticaret A.Ş.”. Torunlar REIC has a participation rate of 40% in the entity since May 2007. Core business activity of Nokta İnşaat is construction and it also owns a land parcel for development, previously owned by Türk Henkel in Turan District, Bayraklı/İzmir. Due to legal matters on the zoning status of the aforementioned land, it became unfavourable to retain the real estate in investment portfolio. Thus, all shares of Nokta İnşaat have been sold for TL4,327 to Torunlar Gıda Sanayi Ticaret A.Ş. (“Torunlar Gıda”), a related party of the Company, on 31 December 2009. Gain on sale of Nokta İnşaat, which had been accounted for by the equity method until the date of sale is TL4,327. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
2.1 Basis of preparation
Financial reporting standards
The Company and its Turkish subsidiaries maintain their books of account and prepare their statutory financial statements in accordance with accounting principles in the Turkish Commercial Code (“TCC”) and tax legislation.
The Capital Markets Board (“CMB”) Communiqué Serial: XI, No: 29 “Financial Reporting Standards in Capital Markets” (“Communiqué Serial: XI, No: 29”) provides principles and standards on the preparation and presentation of financial statements. The Communiqué is applicable commencing from the first interim financial statements prepared subsequent to 1 January 2008, and Communiqué Serial: XI, No: 25 “The Capital Market Accounting Standards” (“Communiqué Serial: XI, No: 25”) is annulled by the application of this communiqué. As per this communiqué, the financial statements should be prepared in accordance with the International Financial Reporting Standards (“IAS/IFRS”) as endorsed by the European Union (“EU”). However, companies will apply IASs/IFRSs until the differences between the standards accepted by the European Union and the standards issued by International Accounting Standards Board (“IASB”) are announced by Turkish Accounting Standards Board (“TASB”). In this respect, Turkish Accounting / Financial Reporting Standards that are issued by TASB and are not controversial to the adopted standards shall be taken as a basis in the application.
As the differences between the International Financial Reporting Standards (“IAS/IFRS”) as endorsed by the European Union and the Turkish Accounting/Financial Reporting Standards (“TAS/TFRS”) have not been declared as of the date of this report, the accompanying financial statements and notes are prepared in accordance with IAS/IFRS as declared in the Communiqué Serial: XI, No: 29 with the required formats announced by the CMB.
The Group maintain their books of account and prepare their statutory financial statements (“Statutory Financial Statements”) in TL in accordance with the Turkish Commercial Code (“TCC”), tax legislation and the Uniform Chart of Accounts issued by the Ministry of Finance, accounting principles issued by the CMB for listed companies. These consolidated financial statements are based on the statutory records, which are maintained under historical cost conversion, with the required adjustments and reclassifications reflected for the purpose of fair presentation in accordance with the CMB Financial Reporting Standards.
The application of inflation accounting to correct financial statements at the period of high inflation
With the decision taken on 17 March 2005 and 11/367 Act, the CMB has announced that, effective from 1 January 2005, the application of inflation accounting is no longer required for companies operating in Turkey. However for IFRS reporting purposes Turkey has been considered a hyperinflationary economy until 31 December 2005 and IAS 29 “Financial Reporting in Hyperinflationary Economies” issued by IASB has not been applied starting from 1 January 2006. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The Group’s functional and presentation currency is TL.
Consolidation principles
The consolidated financial statements include the accounts of the parent company, Torunlar REIC, and its subsidiary, Joint Venture and Associates on the basis set out in sections at the below. The financial statements of the companies included in the scope of consolidation are based on the statutory records which are maintained under historical cost conversion, with adjustments and reclassifications, for the purpose of fair presentations in accordance with CMB and application of uniform accounting policies and presentation.
Subsidiaries
Consolidated financial statements consist of financial statements of the Company, the Company’s subsidiaries and joint ventures. Control is provided with influence on financial and operational policy in order to obtain economic benefit from enterprise benefit.
Subsidiaries are entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date on which control ceases. The Company has the power to govern the financial and operating policies of its Subsidiary for the benefit of the Company through the power to exercise more than 50 % of the voting rights relating its shares in the Subsidiary.
The Company consolidates its Subsidiary from the date of establishment of the Subsidiary by the Group. Where necessary, accounting policies for the Subsidiary can been changed to ensure consistency with the policies adopted by the Company. The balance sheet, statement of comprehensive income and the statement of cash flows of the Subsidiary are consolidated on a line-by-line basis. Intercompany transactions and balances between the Company and the Subsidiary are eliminated on consolidation. The cost of, and the dividends arising from, shares held by the Company in its Subsidiary are eliminated from equity and statement of comprehensive income for the year, respectively. As of 31 December 2010 and 2009, the effective controlling interest of Torunlar REIC in the Subsidiaries is as follows:
The non-controlling shareholders’ share in the net assets and results of Subsidiaries for the year are separately classified as non- controlling interest in the consolidated balance sheets and statements of income. When the losses applicable to the non-controlling shareholders exceed the non-controlling interest in the equity of the subsidiary, the excess loss and the further losses applicable to the non-controlling shareholders are charged against the non-controlling interest. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)
31 December 2010 31 December 2009 % %
Toray Danış 99,99 99,99 TRN 99,99 -
Joint Ventures
The Company’s interest in its Joint Venture is accounted for by proportionate consolidation method effective from the date of joint control. Accordingly, the Company includes its share of assets, liabilities, income and expenses of the Joint Venture in proportion with its shareholding percentage.
Joint Ventures are companies in respect of which there are contractual arrangements through which an economic activity is undertaken subject to joint control by the Company and one or more other parties. The Group exercises such joint control through the power to exercise voting rights relating to shares in the companies as a result of ownership interest directly and indirectly by itself.
The Group’s interest in Joint Ventures is accounted for by way of proportionate consolidation. According to this method, the Group includes its share of the assets, liabilities, income and expenses of each Joint Venture in the relevant components of the financial statements. Liabilities and expenses resulting from the assets controlled jointly are accounted according to their accrual basis. If the economic benefits related to the share of the Group from the revenue obtained from the usage or the sales of the assets of the enterprises subject to joint control are possible to flow to the Group and their amounts are reliably measurable, then the related share is recorded.
Unrealized profits and losses resulting from the transactions between the Group and the Group’s jointly controlled enterprises are eliminated in the share rate of the Group in the enterprises subject to joint management.
As of 31 December 2010 and 2009 Torunlar REIC’s share in the Joint Ventures is a follows:
31 December 2010 31 December 2009 % %
Torunlar Özyazıcı 60,00 60,00 TTA 40,00 - Torunlar Aşçıoğlu Kapıcıoğlu 65,00 -
The Torunlar Özyazıcı, TTA and Torunlar Aşçıoğlu Kapıcıoğlu Joint Ventures have been incorporated on 26 January 2009, 7 January 2010 and 18 October 2010, respectively. All transactions after this date have been proportionally consolidated by the Group. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Current assets, non-current assets, current liabilities and net income of the Joint Ventures have been proportionally consolidated in the consolidated financial statements on a line by line basis. The summary of these amounts are shown below:
Interest in Joint Ventures (*)
31 December 2010 31 December 2009
Current assets 65.339 125.538 Non-current assets 53.553 8.113
Total assets 118.892 133.651
Current liabilities 22.546 111.506 Non-current liabilities - - Shareholders’ equity 96.346 22.145
Total liabilities and shareholders’ equity 118.892 133.651
Net income/(loss) for the period 56.428 (2.631)
(*) Interest in Joint Venture represents the balances of the Joint Venture’s own standalone financial statements which is proportionately consolidated before the intercompany eliminations, reclassifications and adjustments.
Associates
Investments in Associates, over which the Group has significant influence, but which it does not control, are accounted for by the equity method of accounting. The Group’s share of its associates’ post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Associates’ accounting policies have been changed where necessary to ensure consistency with the policies adopted by the Group. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Torunlar REIC’s effective ownership interests in its associates as at 31 December 2010 and 2009 are as follows (%):
31 December 2010 31 December 2009 % %
Yeni Gimat 14,83 14,83 Netsel 44,60 44,60 Nokta İnşaat (*) - -
(*) All shares of Nokta İnşaat have been sold to Torunlar Gıda, which is a related party of the Company, on 31 December 2009 with an amount of TL4,327.
Interest in associates on combined basis (*) 31 December 2010 31 December 2009
Total assets Netsel 974.310 924.226 Total liabilities 171.416 189.754 Net income for the period 91.073 50.964
(*) These combined balances represent amounts presented in the separate financial statements of associates after adjustments for Group accounting policies but before the intercompany eliminations.
Interest in Yeni Gimat
31 December 2010 31 December 2009
Total assets Netsel 946.455 895.240 Total liabilities 165.026 182.789 Net income for the period 87.003 46.292
Interest in other associates on combined basis
31 December 2010 31 December 2009
Total assets Netsel 27.855 28.986 Total liabilities 6.390 6.965 Net income for the period 4.070 4.672
Offsetting
Financial assets and liabilities are offset and the net amount reported in the consolidated balance sheet when there is a legally enforceable right to set-off the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Going concern
The Group’s consolidated financial statements are prepared under the going concern assumption.
2.2. Changes in accounting policies
Material changes in accounting policies are corrected, retrospectively; by restating the prior periods’ consolidated financial statements. The Company has started to implement the bulletin of CMB serial XI, No.29 as of 1 January 2008 and has resubmitted the comparative financial information within this scope. The implementation of CMB Serial XI, No.29 bulletin has not caused important changes on the legal policies of the Company.
Comparative information and reclassifications in the previous period’s financial statements
In order to enable consistent presentation of the financial status and performance trends, the consolidated financial statements of the Group are being prepared in comparison to the previous period. With the aim of providing coherence with the consolidated financial statements of the current period, the classifications to the comparative financial information have been made where appropriate.
Changes in standards and interpretations
Group applied the revised standards and interpretations that are relevant to its operations, published by International Accounting Standards Board (IASB) and International Accounting Standards Committee (IASC) and effective from 1 January 2010.
Application of new or amended standards and interpretations effective for annual periods beginning on or after 1 January 2010:
- IAS 1 (Amendment), “Presentation of Financial Statements” - UMS 36 (Amendment), “Impairment of Assets” - IAS 38 (Amendment), “Intangible Assets” - IFRS 2 (Amendment), “Share based Payment” - IFRS 3 (Amendment), “Business Combinations” and as indirect IAS 27 “Consolidated and Separate Financial Statements”, IAS 28 “Investments in Associates” and IAS 31 “Interests in Joint Venture” - IFRS 5 (Amendment), “Non-current Assets Held for Sale and Discontinued Operations” - IFRIC 9, “Reassessments of Embedded Derivatives” and IAS 39 “Financial Instruments: Recognition and Measurement” - IFRIC 16, “Hedges of a Net investment In A Foreign Operation” - IFRIC 17, “Distributions of Non-cash Assets to Owners” - IFRIC 18, “Transfers of Assets from Customers”
These above amendments did not have material impact on consolidated financial statements. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Standards, amendments and interpretations to existing standards that is not yet effective as of 31 December 2010:
- IAS 32 (Amendment), “Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements” – effective as of 1 January 2011. - IAS 24 (Revised), “Related Party Explanations”- effective as of 1 January 2011 - IFRS 9, “Financial Instruments” - effective as of 1 January 2013. - IFRIC 14 (Revised), “The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction” – effective as of 1 January 2011. - IFRIC 19 “Extinguishing Financial Liabilities with Equity Instruments”- effective as of 1 January 2011.
The Group will evaluate effects of above changes and will apply starting from 1 January 2011.
2.3. Restatement and Errors in the Accounting Policies and Estimates
Material changes in accounting policies and accounting estimates are corrected, retrospectively; by restating the prior periods’ consolidated financial statements. The effect of changes in accounting estimates affecting the current period is recognized in the current period; the effect of changes in accounting estimates affecting current and future periods is recognized in the current and future periods. There has not been any significant change in accounting estimates of the Group for the current period.
2.4. Summary of significant accounting policies
The significant accounting policies followed in the preparation of the consolidated financial statements are summarised below:
Cash and cash equivalents
Cash and cash equivalents are carried at cost in the balance sheet. Cash and cash equivalents comprise cash in hand, bank deposits and highly liquid investments, whose maturity at the time of purchase is less than three months and conversion risk on value at the date is immaterial (Note 4).
Related parties
For the purpose of the consolidated financial statements, shareholders, key management personnel and Board members, in each case together with their families and companies controlled by or affiliated with them, Associates and Joint Ventures and companies controlled by the Torun Family are considered and referred to as related parties. A number of transactions are entered into with related parties in the normal course of business (Note 23).
Foreign currency transactions
The foreign exchange transactions that take place during the period were translated into TL using the exchange rates on transaction dates of the operation dates. Foreign currency denominated monetary assets and liabilities are translated into TL with the exchange rates prevailing on the balance sheet dates. The foreign currency exchange gain and losses that were arisen by the exchange rate change based on monetary assets and liabilities were presented in the consolidate statement of income. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Financial assets
Classification
The financial assets of the Group consist of receivables and cash and cash equivalents. Management determines the classification of its financial assets at initial recognition. a) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date which are classified as non- current assets. Loans and receivables comprise “trade and other receivables”.
Trade receivables generally consist of receivables from sales on credit terms based on preliminary sale agreements and rent receivables from shopping malls. b) Derivative financial instruments
The Group has an interest rate swap transaction as of 31 December 2010. This derivative instrument provides an economic hedge of the Group’s cash flow risks arising from its borrowings. However, documentation requirements for hedge accounting were not met and the instrument has been accounted for at fair value through profit or loss under the “Other financial liabilities” account balance
Recognition and measurement
Regular purchases and sales of financial assets are recognised on the trade-date – the date on which the group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets except for these that are carried at fair value through profit or loss. Financial assets carried at fair value through profit or losses are initially recognised at fair value, and transaction costs are expensed in the consolidated statement of comprehensive income.
Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method.
Derivative financial instruments are initially recognized at cost and subsequently re-measured at fair value. Unrealized gains and losses arising from the changes in the fair values of these instruments are accounted in the consolidated statement of comprehensive income. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Trade receivables and payables
Trade receivables of the Group are initially recognised at fair value and subsequently carried at amortised cost using the effective interest rate method. Short term receivables with no stated interest rate are measured at original invoice amount unless the effect of imputing interest is significant (Note 7).
An impairment provision for trade receivables is established if there is objective evidence that the Group will not be able to collect all amounts due in accordance with the original agreement terms. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of all cash flows, including amounts recoverable from guarantees and collateral, discounted based on the original effective interest rate of the originated receivables at inception.
If the amount of the impairment subsequently decreases due to an event occurring after the write-down, the release of the provision is reversed through other operating income.
Trade payables consist of payables to suppliers for purchases of goods and services. Trade payables and other financial liabilites are accounted for at amortized cost.
Advances received
Advances received comprise amounts received from customers who entered into preliminary sales contracts with the Group for its housing projects. These advances are deferred revenues in nature and considered as non-monetary items. Therefore, these amounts have been classified as short and long term based on the estimated delivery date of the underlying housing units.
The advances received for other operational activities are classified as short-term and long-term according to nature and duration of advances
Financial liabilities and borrowing costs
Borrowings are recognised initially at the proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost using the effective yield method in consolidated financial statements. IAS 23, (Revised) “Borrowing Costs” IAS 23 (revised) requires an entity to capitalize borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset, removing the option of immediately expensing borrowing costs. The Group has applied “allowed alternative treatment” in accordance with the previous IAS 23 and IFRS 1 for periods before 1 January 2009 and started to apply IAS 23 revised for periods starting 1 January 2009. The Group has only Torun Tower as a new qualifying asset where development activities commenced in 2010. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Financial leases
The Group as the lessor
Finance leases
The Group leases certain equipment. Leases of equipment, where the group has substantially all the risks and rewards of ownership, are classified as finance leases. Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the consolidated statement of comprehensive income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Equipment acquired via finance leases are installed in investment properties (elavators, escalators etc) and therefore considered an integral part of these investment properties. These investment properties are carried at fair value in the financial statements and therefore the cost of these equipment is not accounted for separately. Obligations under finance leases are accounted for under the “Financial liabilities” account balance on the balance sheet (Note 5).
Operational leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the consolidated statement of comprehensive income on a straight-line basis over the period of the lease.
The Group as the lessor
Operational leases
Revenue includes rental income, and service charges and management charges from properties. Rental income from operating leases is recognised on a straight-line basis over the lease term. When the Group provides incentives to its tenants, the cost of incentives is recognised over the lease term, on a straight-line basis, as a reduction of rental income only when such incentives are for the acquisition of new tenants. Rent discounts in various forms granted to existing tenants are deducted from revenue in the period in which such discounts are given. Service and management charges are recognised in the accounting period in which the services are rendered (Note 16).
Current and deferred income taxes
The Company is exempt from corporate income taxes in accordance with paragraph d-4 of Article 5 of the Corporate Income Tax Law since its legal status has changed to a REIC in 2008. In accordance with paragraph 6-a of Article 94 of the Income Tax Law, the earnings of the real estate investment trusts are subject to withholding taxes, with Council of Ministers decision No, 93/5148, the withholding rate is determined as “0”, Therefore, the Company has no tax obligation over its earnings for the related period (Note 22).
Both the subsidiary and the joint venture of the Group are ordinary partnership in legal form. Ordinary partnerships do not have a corporate income tax liability as separate legal entities. However partners of ordinary partnerships are liable for corporate income taxes regarding their share in the partnership income. Since the Company itself is exempt from corporate income taxes, its share in these partnerships income is also exempt from Corporate Income Taxes. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Deferred income taxes are provided in full, using the liability method, on all temporary differences arising between the tax bases of assets and liabilities and their carrying values in the financial statements. Currently enacted tax rates are used to determine deferred income tax at the balance sheet date (Note 22). As the Company is exempt from corporate income taxes based on the current tax legislation, no deferred income tax asset or liability has been calculated on temporary taxable and deductible differences in these consolidated financial statements. The corporate tax expense of the Group is related with the newly incorporated subsidiary TRN.
Employment termination benefits
Under the Turkish Labor Law, the Company is required to pay termination benefits to each employee who has completed at least one year of service and whose employment is terminated without due cause, is called up for military service, dies or who retires after completing 25 years of service (20 years for women) and achieves the retirement age (58 for women and 60 for men). Since the legislation was changed on 23 May 2002, there are certain transitional provisions relating to length of service prior to retirement.
The amount payable consists of one month’s salary limited to a maximum of 2,517 in full TL amount as of 31 December 2010 (31 December 2009: TL2,365.16).
The employment termination benefit obligation as explained above is considered as a defined benefit plan under IFRS. IFRS, requires actuarial valuation methods to be developed to estimate the enterprise’s obligation for such benefits. The liability for this unfunded plan recognized in the balance sheet is the full present value of the defined benefit obligation at the end of the reporting period, calculated using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows from the retirement of its employees using the long term TL interest rates.
The principal actuarial assumption is that the maximum liability will increase in line with inflation. Thus the effective discount rate applied represents the expected real interest rate after adjusting for the effects of future inflation. As the maximum liability amount is revised semi-annually by the authorities, the maximum amount of 2,623.23 in full TL which is effective from 1 January 2010 has been taken into consideration when calculating the liability (1 January 2009: TL2,427.04).
Provisions, contingent assets and liabilities
Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. Provisions are not recognized for future operating losses. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Contingent assets or contingent obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group are not included in financial statements and are treated as contingent assets or liabilities (Note 14).
Inventories
Inventories are valued at the lower of cost or net realisable value. Inventories comprise of construction costs of housing units (completed and in-progress) and the cost of land used for to these housing projects. Land held for future development of housing projects are also classified as inventory. Cost elements included in inventory are purchase costs, conversion costs and other costs necessary to prepare the asset for its intended use. Unit costs of the inventories are valued at the lower of cost or net realisable value. Housing units which are completed and ready for delivery to customers together with work-in progress costs for housing units which will be completed within a year, are classified as short term inventories in the consolidated financial statements. Because construction of ongoing projects has started before 1 January 2009 or such projects are already financed with up-front advances from customers, the Group did not capitalize borrowing costs (Note 9).
Property, plant and equipment and related depreciation
Property and equipment are carried at cost less accumulated depreciation and provision for impairment, if any. Any directly attributable costs of setting the asset in working order for its intended use are included in the initial measurement.
Depreciation is calculated over of the cost of property and equipment using the straight-line method based on expected useful lives (Note 10).
The expected useful lives are stated below:
Yıllar
Motor vehicles 5 Furniture and fixtures 4-5
Subsequent costs incurred for tangible assets are included in the asset’s carrying amount or recognized as a separate asset as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the consolidated statement of comprehensive income during the financial period in which they were incurred.
Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down to its recoverable amount and the provision for impairment is charged to consolidated statement of comprehensive income.
Gains and losses on the disposal of property and equipment are determined by deducting the net book value of the property and equipment from its sales and are included in the related income and expense accounts, as appropriate. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Intangible fixed assets
Intangible assets acquired separately are carried at cost, less accumulated amortization and any accumulated impairment losses. Amortization is charged on a straight-line basis over their estimated useful lives. Estimated useful life and amortization method are reviewed at the end of each annual reporting period, with the effect of any changes in the estimate being accounted for on a prospective basis.
Construction contracts
The Group does not have any activities where IAS 11 “Construction Contracts” is applicable. The Group’s activities in housing development projects are accounted for under IAS 18 “Revenue” and IAS 2 “Inventories”.
Non-current assets held for sale
Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell and no depreciation is calculated, if their carrying amount is to be recovered principally through a sale transaction rather than through continuing use. The Group does not have any non-current assets that meet the criteria for asset held for sale as of 31 December 2010 (31 December 2009: None).
Investment properties
Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the companies in the consolidated Group, is classified as investment property. Investment properties are carried at fair value. Changes in fair values are recognised in the consolidated statement of comprehensive income (Note 8).
As from 1 January 2009, in line with the amendment in IAS 40 investment property shall also include properties that are being constructed or developed for future use as investment property. Since the Group is applied IFRS 1, the amendment in IAS 40 has been applied for all periods presented, that is fair value model is also applied to investment properties under construction before 1 January 2009 provided that the fair values of such investment properties under construction were determined at those dates.
Goodwill
Goodwill is not amortised, instead it is tested for impairment annually (at year-ends), or more frequently if events or changes in circumstances indicate that it might be impaired, (Note 13). Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. For the purpose of impairment testing goodwill is allocated to the cash-generating units. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Impairment of assets
The Company reviews all assets including tangible assets at each balance sheet date in order to see if there is a sign of impairment on the stated asset. If there is such a sign, carrying amount of the stated asset is projected. Impairment exists if the carrying value of an asset or a cash generating unit including the asset is greater than its net realizable value. Net recoverable value is the higher of the net sales value or value in use. Value in use is the present value of cash flows generated from the use of the asset and the disposal of the asset after its useful life. Impairment losses are recorded in the consolidated statement of comprehensive income. Impairment loss for an asset is reversed, if an increase in recoverable amount is related to a subsequent event following the booking of impairment by not exceeding the amount reserved for impairment.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the board of directors (Note 3).
Revenue recognition
Revenue is recognised when the amount of revenue can be measured reliably and when it is probable that the economic benefits associated with the transaction will flow to the Group. Revenue is presented net of value added and sales taxes. The following criteria are necessary for the recognition of revenue:
Rent income obtained from investment properties
Rent income from investment properties is recognised on an accrual basis. Revenue is realized when economic benefits arising from the transaction have passed, and when the amount of such income can be reliably measured. Rent discounts and similar promotions granted to existing tenants from time to time are netted of from rent revenues as they are not rent incentives for acquisition of new contracts.
Common area charges, service and management fee
Rental income includes service charges and management fees from properties. Common area charges, service and management fees are recognised as income in the accounting period in which the services are rendered in accordance with the individual provisions of rental contracts entered into with tenants. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Sale of real estate
Income obtained from the sales of the real estate (residential and office units classified as inventories) is accounted as soon as the below conditions are met:
• The Group has transferred all significant risks and rewards associated property to the buyer. (Transfer of title generally coincides with the final acceptance by the customers of the residential or office units sold and that is when the risk and rewards of ownership is considered to have passed to the customer). • The Group is not having any control on the continued administrative participation associated with property and on the sold properties, • Measuring the amount of income reliably, • Possibility of a flow of the economic benefits related to the transaction to the Group and • Reliable measurement of the inflows resulting from the transaction reliably.
Interest income
When the arrangement effectively constitutes a financing transaction, the fair value of the consideration is determined by discounting all future receipts using an imputed rate of interest.
Dividend income
Dividend income is recognized by the Group at the date the right to collect the dividend is realized.
Paid-in capital
Ordinary shares are classified as equity. Proceeds from issuing new equity instruments are recorded net of transaction costs.
Share premium
Share Premium represents the positive difference between the nominal value of issued shares and proceeds for such shares issued.
Earnings per share
Earnings per share are determined by dividing net comprehensive income by the weighted average number of shares that have been outstanding during the period concerned.
In Turkey, companies can increase their share capital by making a pro-rata distribution of their shares (“Bonus Shares”) to existing shareholders funded from retained earnings or other reserves. For the purpose of earnings per share computations, such Bonus Share issuances are regarded as issued shares for all periods presented and accordingly the weighted average number of shares used in earnings per share computations in prior periods is adjusted retroactively for the effects of these shares, issued without receiving cash or another consideration from shareholders. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Reporting of cash flows
Consolidated statement of cash flows includes cash and cash equivalents, cash with original maturity periods of less than three months and bank deposits (Note 4).
Offsetting
Each material class of similar items according to their nature or function is presented separately in the financial statements. If a line item is not individually material, it is aggregated with other similar items according to their nature or function. If the essence of the transaction and events requires offsetting, presentation of these transactions and events at their net values or following up of the assets at their amounts after the deduction of impairment, is not evaluated as a breach of the non-deductibility rule.
Dividends
Dividend income is recognized by the Group at the date the right to collect the dividend is realized. Dividend payables are recognized as a result of profit distribution in the period they are declared.
Subsequent events
Subsequent events cover any events which arise between the reporting date and the balance sheet date, even if they occurred after any declaration of the net profit for the period or specific financial information publicly disclosed. The Company adjusts its financial statements if such subsequent events arise which require an adjustment to the financial statements (Note 26).
2.5 Critical accounting estimates, assumptions and judgements
The preparation of consolidated financial statements requires the use of assumptions and estimates that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues expenses which are reported throughout the period. Even though, these assumptions and estimates rely on the best estimates of the Company management; the actual results might differ from them. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are outlined below:
Fair valuation of investment properties:
In the consolidated financial statement, investment properties are carried at fair values. Fair values are determined by independent valuation experts Prime Gayrimenkul Değerleme ve Danışmanlık A.Ş in 2010 and 2009. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following assumptions used by valuation experts, that is the selection of the valuation method, the discount rate, the rent increase per annum, the capitalisation rate (which is the discount rate used to determine the terminal value) and determination of the market comparable m² values are considered critical and thus disclosed below in tabular format. Compareble Valuation market report Valuation Discount Rent increase Capitalisation m2 value 31 December 2010 date method rate (*) rate p.a. rate in full TL
Istanbul Başakşehir land 31/12/2010 Discounted cash flow %10,00-%10,50 %3,00 %6,50-%7,00 - (“Mall of İstanbul land”) Sale comparison - - - 1000 Bursa Korupark Shopping Mall 31/12/2010 Discounted cash flow %8,50 %2,00 %6,50 - Istanbul Esenyurt land 31/12/2010 Discounted cash flow %9,00 %3,50 %6,50 - (“Torium land”) Istanbul Esentepe land 31/12/2010 Discounted cash flow %11,50 %3,00 %7,00 - (“Torun Tower land”) Bursa Zafer Plaza Shopping Mall 31/12/2010 Discounted cash flow %9,50 %3,00 %6,50 - Antalya Deepo Shopping Mall 31/12/2010 Discounted cash flow %9,50 %3,00 %6,50 - Antalya Koyunlar land 31/12/2010 Sale comparison - - - 60-400 Istanbul İkitelli Küçükçekmece Kayabaşı land 31/12/2010 Sale comparison - - - 261 Istanbul Beyoğlu Kemankeş building 31/12/2010 Sale comparison - - 3.096 Bursa Korupark - Separate units 31/12/2010 Discounted cash flow %9,50-10,00 %2,50-3,00 %6,50-7,00 - Nishistanbul retail units 31/12/2010 Discounted cash flow %10 %3 %7 -
(*) Discount rates are based on the currency in which the majority of cash flows are denominated for each investment property. In Turkey Euro and USD are commonly used in rent agreements. Compareble Valuation market report Valuation Discount Rent increase Capitalisation m2 value 31 December 2009 date method rate (*) rate p.a. rate in full TL
İstanbul Başakşehir land 21/01/2010 Discounted cash flow %10.50 - %11.00 %3.00 %6.00 - %7.00 - (“Mall of İstanbul land”) Sale comparison - - - 1.000 Bursa Korupark Shopping Mall 20/12/2009 Discounted cash flow %8.50 %3.00 %5.50 - İstanbul Esenyurt land 20/12/2009 Discounted cash flow %11.50 %3.00 %8.5 - (“Torium land”) İstanbul Esentepe land 20/12/2009 Discounted cash flow %12.00 %3.00 %7.00 - (“Torun Tower land”) Bursa Zafer Plaza Shopping Mall 20/12/2009 Discounted cash flow %8.50 %3.00 %5.00 - Antalya Deepo Shopping Mall 20/12/2009 Discounted cash flow %9.00 %3.00 %6.00 - Antalya Koyunlar land 20/12/2009 Sale comparison - - - 50-225 İstanbul İkitelli Küçükçekmece Sale comparison - - - 184 Kayabaşı land 31/12/2010 Discounted cash flow %7.50 %3.00 %8.00 - İstanbul Beyoğlu Sale comparison - - - 2.200 Kemankeş building 20/12/2009 %12.00 - %7.50 - Bursa Korupark Seperate units 20/12/2009 Discounted cash flow %9.50 - %7.50 - TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) i. As at 31 December 2010, 131,367 m² of land located in İstanbul - Başakşehir İkitelli - 2 district is classified under investment properties. The Group is planning to build a multipurpose project called Mall of İstanbul Project on this land, which will include a shopping mall, a hotel and residence and office spaces. At this stage the Group is holding this land for capital appreciation while considering the best future use for this land.
Based on Prime Gayrimenkul Değerleme ve Danışmanlık A.Ş.’s valuation report, as at 31 December 2010 the aforementioned property’s fair value is TL645,787 (21 January 2010: TL 619.419; 26 December 2008: TL414.070). These amounts represent the share of the Company on the mentioned property. ii. As at 31 December 2010, 53,185.61 m² of Bursa Korupark Shopping Mall located in Bursa - Osmangazi Emek district is classified under investment properties. Construction of Bursa Korupark Shopping Mall had been finanlized in 2007 and on May 2007 the shopping mall had been opened. Management of the Mall conducted by Torun Alışveriş Merkezleri Yatırım ve Yönetim A.Ş. (“Torun AVM”) - a related party of the Group. Based on Prime Gayrimenkul Değerleme ve Danışmanlık A.Ş.’s valuation report, as at 31 December 2010 the aforementioned property’s fair value is TL540,510 (29 December 2009: TL590.042; 24 October 2008: TL563.634). iii. On the 44,571 m² land located in İstanbul - Büyükçekmece Esenyurt district - which is classified under investment property as of 31 December 2010 in the consolidated financial statements the Company develops Torium Project. The project includes a shopping mall and residences. The Company have completed the project and shopping mall has been opened for visitors as at 30 September 2010.
Based on Prime Gayrimenkul Değerleme ve Danışmanlık A.Ş.’s valuation report, as at 31 December 2010 the aforementioned property’s fair value is TL549,876 (29 December 2009: TL399.617; 25 December 2008: TL93.385). These amounts represent the share of the Company on the mentioned property. As a part of the Torium Project, Torium Residence is constructed independently from Torium Shopping Mall which was classified under inventories as of 31 December 2010 (Note 9). iv. On the 14,992 m² land located in İstanbul - Şişli 2nd District - which is classified under investment property as of 31 December 2010 in the consolidated financial statements, the Company develops Torun Tower Project. The mentioned project is planned to include residence and offices.
Based on Prime Gayrimenkul Değerleme ve Danışmanlık A.Ş.’s valuation report, as at 31 December 2010 the aforementioned property’s fair value is TL237,736 (29 December 2009: TL167.656; 25 December 2008: TL149.915). TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) v. Bursa Zafer Plaza located on the 9,622 m² land in Bursa - Osmangazi Şehreküstü District - which is classified under investment property as of 31 December 2010 in the consolidated financial statements has been opened in October 1999. Management of the Mall is conducted by Zafer Plaza İşletmecilik A.Ş. a related party of the Group.
Based on Prime Gayrimenkul Değerleme ve Danışmanlık A.Ş.’s valuation report, as at 31 December 2010 the aforementioned property’s fair value is TL143,156 (29 December 2009: TL149.201; 24 December 2008: TL156.045). These amounts represent the share of the Company on the mentioned property. vi. Antalya Deepo Shopping Mall located on 57.253 m² land in Antalya - City Centre Koyunlar District - which is classified under investment property as of 31 December 2010 in the consolidated financial statements has been opened in October 2004. Management of the Mall is conducted by Torun Alışveriş Merkezleri Yatırım ve Yönetim A.Ş. a related party of the Group.
Based on Prime Gayrimenkul Değerleme ve Danışmanlık A.Ş.’s valuation report, as at 31 December 2010 the aforementioned property’s fair value is TL180,492 (29 December 2009: TL124.981; 26 December 2008: TL100.675).
According to the appraisal report obtained from Prime Gayrimenkul Değerleme ve Danışmanlık A.Ş., for the related property to be included in the REIC portfolio, 1/1000 scale Implementation Zoning Plan shall be approved by the Kepez Municipality Zoning Directorate and Antalya Metropolitan Municipality Zoning Directorate and subsequently all related legal permits for the shopping mall shall be obtained. In accordance with the Extraordinary General Assembly Meeting held on 9 March 2010, the Company has transferred Antalya Deepo AVM, which was unfavourable to retain in investment portfolio with respect to its current situation, to a newly incorporated subsidiary of the Company, TRN Alışveriş Merkezleri Yatırım ve Yönetim A.Ş. (“TRN”) by “partial split”. The related transfer has been performed as of 31 March. vii. The Company owns 79,334 m² land located in Antalya - City Centre Koyunlar District - which is classified under investment property as of 31 December 2010 in the consolidated financial statements. The usage of this land has not been determined by the management as of balance sheet date and the land is retained for capital appreciation.
Based on Prime Gayrimenkul Değerleme ve Danışmanlık A.Ş.’s valuation report, as at 31 December 2010 the aforementioned property’s fair value is TL28,334 (29 December 2009: TL14.772; 26 December 2008: TL21.856). TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) viii. The Company owns 60,833 m² land located in İstanbul - Küçükçekmece Kayabaşı District - which is classified under investment property as of 31 December 2010 in the consolidated financial statements. The usage of this land has not been determined by the management as of balance sheet date.
Based on Prime Gayrimenkul Değerleme ve Danışmanlık A.Ş.’s valuation report, as at 31 December 2010 the aforementioned property’s fair value is TL15,904 (29 December 2009: TL13.646; 17 November 2008: TL12.170). ix. The Company owns a building located on 1,501 m² land in İstanbul - Beyoğlu Kemankeş District - which is classified under investment property as of 31 December 2010 in the consolidated financial statements. The building is planned to be renovated as a hotel.
Based on Prime Gayrimenkul Değerleme ve Danışmanlık A.Ş.’s valuation report, as at 31 December 2010 the aforementioned property’s fair value is TL12,703 (29 December 2009: TL11.045; 23 October 2008: TL10.725). x. As at 31 December 2010 separate unit of Bursa Korupark Shopping Mall located in Bursa - Osmangazi Emek district which is classified under investment properties includes a dolphin pool, social recreation areas, office and depots.
Based on Prime Gayrimenkul Değerleme ve Danışmanlık A.Ş.’s valuation report, as at 31 December 2010 the aforementioned property’s fair value is TL9,324 (29 December 2009: TL6.051; 17 November 2008: TL6.090). xi. The Group develops Nishistanbul project which comprise residence, offices and retail units. (Note 9).
As at 31 December retail units of Nishistanbul project which were classified under inventory as of 31 December 2009 and were carried at are cost are classified under investment properties as of 31 December 2010 and are carried at their fair values. The management changed their plan to sell these retail units and decided to lease them and accordingly, the retail units have been classified as investment property over their fair values. The retail units consist of 34 units on a total of 7,206 m² land.
Based on Prime Gayrimenkul Değerleme ve Danışmanlık A.Ş.’s valuation report, as at 31 December 2010 the aforementioned property’s fair value is TL25,673.
Comparative Informations and Classifications of the Previous Period’s Financial Statements
The classifications at the balance sheet dated 31 December 2009:
- Trade Payables: The deposits and guarantees received amounting to of TL2,315 which were previously elussified in shor-term ‘Trade Payables’’ as of 31 December 2009, has been classified to short term ‘’Other Liabilites’’ item of the consolidated financial statements. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 3 - SEGMENT REPORTING
The reportable segments of Torunlar REIC have been organised by management as a portfolio on a project-by-project basis and makes decisions about resources to be allocated to the properties on the same basis. Major items classified under other items are those projects which are related to other major projects but not a part of them, such as Bursa Korupark separate units, İstanbul İkitelli Küçükçekmece land.
Accounting policies applied by each operational segment of Torunlar REIC are the same as those are applied in Torunlar REIC’s consolidated financial statements prepared in accordance with International Financial Reporting Standards. a) The segment information for the reportable segments as of and for the period ended 31 December 2010 is as follows:
Total segment Gross Capital Income from revenue profit Depreciation expenditure(*) associates (**)
Zafer Plaza Shopping Mall 8.400 6.126 - - - Antalya Deepo Shopping Mall 13.656 9.380 - 1.637 - Korupark Shopping Mall 39.822 29.672 - 250 - Torium Shopping Mall (***) 9.377 3.572 - 98.599 - Torium Residences - - - 6.741 - Ankamall - - - - 12.903 Korupark Residences 41.909 21.691 - 1.983 - Nishistanbul Project 119.444 9.342 - 85.554 - Mall of Istanbul Project - - - 18.277 - Torun Tower Project - - - 239 - Other 320 235 183 - 1.815
Total 232.928 80.018 183 213.280 14.718
(*) Capital expenditures include expenditures made for residence and shopping mall constructions which are classified as inventories and investment properties in the consolidated financial statements. (**) Income from the associate: Yeni Gimat consists of rent income from Ankaramall Shopping Mall and Crowne Plaza Hotel amounting to TL12,903. The income from the associate: Netsel amounting to TL1,815 is classified in other. (***) The Company’s shopping center in Istanbul called “Torium Mall”, is launched on 30 October 2010. The amount includes segment revenue, gross profit and capital expenditures after the launch of the shopping mall. b) The segment information for the reportable segments as of and for the period ended 31 December 2009 is as follows:
Total segment Gross Capital Income from revenue profit Depreciation expenditure(*) associates (**)
Zafer Plaza Shopping Mall 8.400 6.126 - 7 - Antalya Deepo Shopping Mall 10.447 8.03 - - - Korupark Shopping Mall 28.687 23.491 - 150 - Ankamall - - - - 6.866 Korupark Residences 65.240 30.810 - 9.432 - Nishistanbul Project 140 - - 35.528 - Torium Project - - - 54.526 - Mall of Istanbul Project - - - 6.401 - Other 7.244 6.513 195 6.777 374
Total 120.158 74.975 195 112.821 7.240 TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 4 - CASH AND CASH EQUIVALENTS
31 December 2010 31 December 2009
Cash in hand 3 6 Cash at banks - demand deposits 32 4 - time deposits 438.591 72.617 Others 38 12
438.664 72.639
As of 31 December 2010 and 2009 cash and cash equivalents at the consolidated statement of cash flows are as follows:
31 December 2010 31 December 2009
Cash and cash equivalents 438.664 72.639 Less: Blocked deposits (*) (121.447) -
Nakit akım tablosundaki hazır değerler 317.217 72.639
(*) As of 31 December 2010 time deposits amounting to USD75,000 are blocked due to the borrowing agreement made with the bank amounting to USD100,000. The interest rate of this blocked time deposit is 5.60% per annum with 25 February 2011 maturiy date.
Maturities of cash and cash equivalents are as follows:
31 December 2010 31 December 2009
Up to 30 days 266.508 760 30 - 90 days 172.156 71.879
438.664 72.639
The breakdown of foreign currency denominated cash and cash equivalents in terms of TL is as follows:
31 December 2010 31 December 2009
USD 166.316 - EUR 22.501 31.276
188.817 31.276
Average effective interest rates of time deposits are as follows (%):
31 December 2010 31 December 2009 (%) (%)
USD 5,52 - EUR 4,09 3,68 TL 8,84 10,47 TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 5 - FINANCIAL LIABILITIES
Financial Investment
The time deposits that have more than three months maturity:
Currency Interest rate Maturity 31 December 2010 Interest rate Maturity 31 December 2009 EUR 4,00 Ocak 2010 24.549 - - -
Financial Liabilities
31 December 2010 31 December 2009
Short-term bank borrowings 155.539 121.088 Short-term portion of long-term bank borrowings 75.602 34.606 Long-term bank borrowings 552.122 462.858
783.263 618.552
Weighted average effective interest 31 December 2010 (%) Currency Original balance TL equivalent
Short-term bank borrowings 3,61 USD 86.900 134.347 3,00 EUR 1.001 2.051 8,64 TL 19.141 19.141
Short-term portion of long-term bank borrowings 6,36 USD 32.630 50.447 4,88 EUR 12.276 25.155
Long-term bank borrowings 5,82 USD 198.250 306.495 4,91 EUR 119.871 245.627
Total bank borrowings 783.263
Weighted average effective interest 31 December 2009 (%) Currency Original balance TL equivalent
Short-term bank borrowings 5,54 USD 66.090 99.514 5,11 EUR 2.111 4.561 11,56 TL 17.013 17.013
Short-term portion of long-term bank borrowings 6,50 USD 8.146 12.265 4,54 EUR 10.342 22.341
Long-term bank borrowings 5,91 USD 123.828 186.447 4,54 EUR 127.900 276.302 21,02 TL 109 109
Total bank borrowings 618.552 TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 5 - FINANCIAL LIABILITIES (Continued)
The redemption schedules of long-term borrowings at 31 December 2010 and 2009 are as follows:
31 December 2010 31 December 2009 2011 - 106.910 2012 142.442 65.294 2013 95.665 70.587 2014 and over 314.015 220.067
552.122 462.858
The analysis of borrowings in terms of periods remaining to contractual repricing dates is as follows:
31 December 2010 31 December 2009 Up to 3 months (*) 584.633 303.271 3-12 months 196.500 107.159 1-5 years 2.130 208.122
783.263 618.552
(*) Interest of borrowings amounting to TL264,489 is fixed until 2012 with an interest rate swap contract (31 December 2009: TL298,644) (Note 6).
Financial lease liabilities of the Group are as follows:
Short-term financial lease liabilities 31 December 2010 31 December 2009
USD EUR TL USD EUR TL Financial lease liabilitiesErtelenmiş finansal - 10 21 59 736 1.677 Unaccrued interest - - (1) (1) (1) (38)
20 1.639
Long-term financial lease liabilities
31 December 2010 31 December 2009
USD EUR TL USD EUR TL Financial lease liabilities - - - - 12 25 Unaccrued interest - - - - (1) (2)
- 23 TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 5 - FINANCIAL LIABILITIES (Continued)
The repayment schedule of undiscounted financial lease liabilities is as follows:
31 December 2010 31 December 2009 2011 - 1.639 2012 20 23
20 1.662
NOTE 6 - OTHER FINANCIAL LIABILITIES
Derivative financial instruments
31 December 2010 Notional Fair value amount liability Interest rate swap contracts 264.489 (3.877)
264.489 (3.877)
At 9 June 2009, the Group has signed an interest rate swap contract to fix the Euribor floating interest of its long term borrowing for the period from 2010 to 2012. According to the contract signed, euribor and the total interest of the borrowing are fixed at 2.74% and 4.94% accordingly between 2009 and 2012. 31 December 2009 Notional Fair value amount liability Interest rate swap contracts 291.641 (4.846
291.641 (4.846) TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 7 - TRADE RECEIVABLES AND PAYABLES
Short-term trade receivables
31 December 2010 31 December 2009 Trade receivables from related parties (Note 23) (**) 35.312 44.723 Trade receivable 10.000 10.986 Notes receivable 6.389 4.286 Notes receivables from related parties (Note 23) 105 7.600 Receivables from the Joint Venture Partner (*) - 9.134
51.806 76.729
Less: Provision for doubtful receivables (1.874) (1.789) Less: Unearned credit finance income (226) (272)
49.706 74.668
(*) As of 31 December 2009 receivable from the Joint Venture Partner namely Özyazıcı İnşaat Elektrik, Makine, Müşavirlik ve Taah. Ltd. Şti. (“Özyazıcı”) amounting to TL9,134 is related with the transfer of land in accordance with the joint venture contract. Özyazıcı has paid advances amounting to TL15,224 to İstanbul Yem Sanayi ve Ticaret A.Ş. - the landlord - before the incorporation of the joint venture for the mentioned land on which Nishistanbul project will be developed. The receivable is closed with the transfer of land to joint venture.
(**) Group, provided funds to Torunlar Aşçıoğlu Kapıcıoğlu Project partnership in the amount of TL95,000 which was used by the Partnership to make the advance payment to The Republic of Turkey Prime Ministry Housing Development Administration which amount to TL97,165 within the scope of Ali Sami Yen Project as of 31 December 2010. TL34,008 which is the exceeding amount of the Group’s %65 share in the partnership, has been presented as receivables from Torunlar Aşçıoğlu Kapıcıoğlu Project Partnership within the receivables from related parties.
Long-term trade receivables 31 December 2010 31 December 2009 Notes receivable 5.377 5.708 Notes receivable from related parties (Note 23) - 2.677
5.377 8.385
Less: Unearned credit finance income (648) (916)
4.729 7.469 TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 7 - TRADE RECEIVABLES AND PAYABLES (Continued)
Movement of the provision for doubtful receivables is as follows:
31 December 2010 31 December 2009 At the beginning of the period (1.789) (1.789) Current year additions (85) -
At the end of the period (1.874) (1.789)
The aging schedule of impaired doubtful receivables is as follows:
31 December 2010 31 December 2009 3-6 months (85) - 6 months and over (1.789) (1.789)
(1.874) (1.789)
Short-term trade payables
31 December 2010 31 December 2009 Trade payables 28.221 8.446 Due to related parties (Note 23) 3.501 7 Notes payable 1.862 - Due to the Joint Venture Partner 952 - Other - 166
34.536 8.619 TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 8 - INVESTMENT PROPERTIES
Movement schedule of investment property as of 31 December 2010 and 2009:
Change 1 January in fair 31 December 2010 Additions Disposals Transfers value 2010 Mall of İstanbul land 619.419 18.277 - - 8.091 645.787 Torium Shopping Mall (*) 399.617 98.599 - (1.728) 53.388 549.876 Bursa Korupark Shopping Mall 590.042 250 - - (49.782) 540.510 Torun Tower land 167.656 239 - - 69.841 237.736 Antalya Deepo Shopping Mall (**) 124.981 334 - - 55.177 180.492 Bursa Zafer Plaza Shopping Mall 149.201 - - - (6.045) 143.156 Antalya Koyunlar land (**) 14.772 1.303 - - 12.259 28.334 Nishistanbul retail units - 12.617 (4.179) - 17.235 25.673 Kayabaşı land 13.646 - - - 2.258 15.904 Kemankeş building 11.045 - - - 1.028 12.073 Korupark separate units 6.051 63 - - 3.210 9.324
2.096.430 131.682 (4.179) (1.728) 166.660 2.388.865
(*) Current year transfers relate to the cost of land transferred to inventories for the purporse of construction of residential building. (**) As concluded in the valuation report of Prime Gayrimenkul Değerleme ve Danışmalık A.Ş., the addition of the Antalya Deepo Shopping Mall into the investment portfolio is contingent to the authorisation of 1/1000 scale Implementation Zoning Plan by Kepez Zoning Directorate and Antalya Metropolitan Municipality Zoning Directorate and subsequently obtaining all related legal permits for the shopping mall. In accordance with the Extraordinary General Assembly Meeting held on 9 March 2010, the Company transferred Antalya Deepo AVM, which was unfavourable to retain in investment portfolio with respect to its current situation, to a newly incorporated subsidiary of the Company, TRN Alışveriş Merkezleri Yatırım ve Yönetim A.Ş. (“TRN”) by “partial split”. The related transfer has been performed as of 31 March 2010.
Change 1 January in fair 31 December 2009 Additions Disposals Transfers value 2009 Mall of İstanbul land 414.070 6.401 - 7.560 191.388 619.419 Bursa Korupark Shopping Mall 563.634 150 - - 26.258 590.042 Torium land 93.385 54.526 - - 251.706 399.617 Torun Tower land 149.915 - - - 17.741 167.656 Bursa Zafer Plaza Shopping Mall 156.045 7 - - (6.851) 149.201 Antalya Deepo Shopping Mall 100.675 - - - 24.306 124.981 Antalya Koyunlar land 21.856 - - - (7.084) 14.772 İstanbul İkitelli K.Çekmece Kayabaşı land 12.170 - - - 1.476 13.646 İstanbul Beyoğlu Kemankeş building 10.725 - - - 320 11.045 Bursa Korupark separate units 6.090 6.377 - - (6.416) 6.051 İstanbul İkitelli Küçükçekmece land (*) 12.245 - - (7560) (4.685) -
1.540.810 67.461 - - 488.159 2.096.430
(*) After the purchase of the land at 29 June 2009 in İstanbul İkitelli Küçükçekmece, at block 858, lot 2 which is owned by T.C. Başbakanlık Toplu Konut İdaresi, the land in lots 2453 and 2859 are merged with the land in block 858 lots 1 and 2. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 8 - INVESTMENT PROPERTIES (Continued)
Liens on investment properties regarding bank borrowings at 31 December 2010 and 2009 are as follows:
Original balance Currency 31 December 2010 31 December 2009 Mall of İstanbul land (*) 166.000 TL - 166.000 Bursa Korupark Shopping Mall 225.000 EUR 461.048 486.068 Torium land 120.000 USD 185.520 180.684 Torun Tower land 100.000 USD 154.600 150.570
801.168 983.322
(*) The liens on the land of Mall of İstanbul is removed at 5 March 2010.
NOTE 9 - INVENTORIES
Short-term inventories
31 December 2010 31 December 2009 Land 6.383 4.655 Semi-finished houses 35.020 42.799 Finished houses 7.347 53.655 Commercial goods 1.303 - Order advances given 1.716 539
51.769 101.648
The Company has started in May 2006 to build the Bursa Korupark Evleri project on 83,207 m2 land in 3 stages which is located in Bursa.
The construction of first stage, which consist of 343 residences, has been completed in 2008 and 321 residences out of 343 have been sold as of 31 December 2010 (31 December 2009: 304).
The construction of second stage, which consist of 403 residences, has been completed in 2009 and 300 residences out of 403 have been sold as of 31 December 2010 (31 December 2009:191). The construction of the second stage has been finished in 2009. After the sales of residences from first and second stage as of 31 December 2010, 125 residence are in hand for sale (31 December 2009: 251). TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 9 - INVENTORIES (Continued)
The details of valuation reports for Bursa Korupark Evleri are as follows:
Date Valuation Construction cost to net expert realisable value decrease 31 December 2010 Prime Gayrimenkul A.Ş. - 29 December 2009 Prime Gayrimenkul A.Ş. -
The construction of third stage, which is planned to include 373 residences, has not started as of 31 December 2010. Based on the valuation report prepared by Prime Gayrimenkul A.Ş. dated 31 December 2010, there is no impairment for the land of the third stage of Bursa Korupark Evleri.
Torunlar Özyazıcı has been incorporated as an ordinary partnership with Özyazıcı İnşaat Elektrik, Makine Müşavirlik ve Taahhüt Limited Şirketi by a joint venture agreement on 26 January 2009. The subject of the joint venture is to conduct construction and sales of the housing development project: Nishistanbul in Yenibosna İstanbul. This project includes 63 offices, 585 residences and 52 shops in 4 blocks with 17 storeys. As of 31 December 2010, the project is completed (31 December 2009:63%).
In accordance with the revenue sharing agreement signed between Torunlar Özyazıcı and the landlord, 31% of total project revenues will be distributed to the landlord and the remaining 69% portion will be divided to the joint venture partners as 60% Torunlar REIC and 40% Özyazıcı İnşaat Elektrik, Makine, Müşavirlik ve Taah. Ltd. Şti..
The offices and shops located within Nishistanbul Project are intented to be rented after the completion of the Project by management. The relevant offices and stores are classified as investment property and carried at fair value as of 31 December 2010.
Based on the valuation report prepared by Prime Gayrimenkul A.Ş. dated 31 December 2010, the net realisable value is higher than the cost of construction of Nishistanbul project. As of 31 December 2010, the land amounting TL1,728 and cost of semi-finished residences amounting TL5,012 is realted to Torium residences.
Based on the valuation report numbered 2010/TGYO/11 and dated 31 December 2010, which is prepared by Prime Gayrimenkul A,Ş., net realizable value of semi-finished residences is over the cost of construction. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 10 - PROPERTY, PLANT AND EQUIPMENT
1 January 2010 Additions Disposals 31 December 2010 Cost
Furniture and fixtures 160 296 - 456 Motor vehicles 737 105 - 842 Construction in progress - 473 - 473
897 874 - 1.771
Accumulated depreciation
Furniture and fixtures (97) (45) - (142) Motor vehicles (393) (121) - (514)
(490) (166) - (656)
Net book value 407 1.115
Current year deprecation charge amounts to TL17 (31 December 2009: None). Total depreciation charged to income statement is TL183.
1 January 2009 Additions Disposals 31 December 2009 Cost
Furniture and fixtures 948 48 (836) 160 Motor vehicles 418 352 (33) 737
1.366 400 (869) 897
Accumulated depreciation
Furniture and fixtures (397) (113) 413 (97) Motor vehicles (340) (82) 29 (393)
(737) (195) 442 (490)
Net book value 629 407 TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 11 - OTHER ASSETS AND LIABILITIES
31 December 2010 31 December 2009 Other current assets
Value added tax (“VAT”) receivables 37.862 891 Prepaid expenses 1.526 27 Prepaid taxes and funds 17 18 Job advances given 43 17 Other 194 723
39.642 1.676
31 December 2010 31 December 2009 Other non-current assets
Advances given (*) 61.750 - VAT receivables 11.192 29.212 Prepaid expenses 1.408 1.910
74.350 31.122
(*) Torunlar Aşçıoğlu Kapıcıoğlu Project Partnership paid TL95,000 to TOKİ within the content of Ali Sami Yen Project and 65% of the advance paid is attributable the Group.
31 December 2010 31 December 2009 Other short-term liabilities
Deposits and warranties received 4.846 2.315 Advances received (*) 3.110 65.033 Taxes and funds payable 1.743 269 Deferred income 1.395 1.021 Due to personnel 321 123 Allowances for payables 990 - Other 565 192
12.970 68.953
(*) As of 31 December 2010 advances received amounting to TL718 are related with Nishistanbul Project residence sales (31 December 2009: TL43,482). The Group has started the delivery of the residences and offices on 14 July 2010 and as of 31 December 2010, 560 residences, 58 offices and 18 shops are delivered to their owners. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 12 - INVESTMENTS IN ASSOCIATES
31 December 2010 31 December 2009 % TL % TL Yeni Gimat 14,83 115.886 14.83 105.657 Netsel 44,60 9.572 44.60 9.821 Nokta İnşaat (*) - - - -
125.458 115.478
(*) All shares of Nokta İnşaat have been sold to Torunlar Gıda, which is a related party of the Company, on 31 December 2009 with an amount of TL 4,327. 31 December 2010 31 December 2009 At the beginning of the period 115.478 112.774
Income from associates (net) 14.725 7.240 Dividends received from associates (4.745) (4.536)
At the end of the period 125.458 115.478
Income/expense from investments in associates
31 December 2010 31 December 2009 Yeni Gimat 12.910 6.866 Netsel 1.815 2.083 Nokta İnşaat - (1.709)
Total 14.725 7.240
NOTE 13 - GOODWILL
31 December 2010 31 December 2009 At the beginning of the period 8.250 8.250
Goodwill transferred to income statement (8.250) -
At the end of the period - 8.250 TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.
NOTE 14 - COMMITMENTS, CONTINGENT ASSETS AND LIABILITIES
Contingent assets and liabilities are as follows:
31 December 2010 31 December 2009 Liens received 36.000 36.000 Guarantees received 16.521 10.255
The totals of expected minimum operational lease revenues as of 31 December 2010 and 2009 are as follows:
31 December 2010 31 December 2009 Operational lease revenues between 0-1 years 81.029 45.27610.255 Operational lease revenues between 1-5 years 215.328 192.507
The minimum operational lease revenue represents lease revenue from Korupark shopping mall, Torium shopping mall, Zafer shopping mall and Deepo shopping mall. The lease revenues from Ankaramall and Crowne Plaza hotel that are owned by Yeni Gimat-associate of the group are not included to minumum operational lease revenue.
Below are the amounts of guarantees, pledges and mortgages of the Group as of 31 December 2010 and 2009:
31 December 2010 31 December 2009 CPM’s given by the company (Collaterals, Pledges, Mortgages) A. CPM’s given for companies own legal personality 801.168 1.068.520 B. CPM’s given on behalf of fully consolidated companies 2.428 1.500 C. CPM’s given for continuation of its economic activities on behalf of third parties - - D. Total amount of other CPM’s i) Total amount of CPM’s given onbehalf of the majority shareholder - - ii) Total amount of CPM’s given to on behalf of other Group companies which are not in scope of B and C - - iii) Total amount of CPM’s given on behalf of third parties which are not in scope of C - -
803.596 1.070.020
As of 31 December 2010 liens on investment properties of the Group is TL801,168 (31 December 2009: TL983,322) (Note 8). TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 14 - COMMITMENTS, CONTINGENT ASSETS AND LIABILITIES (Continued)
31 December 2010 31 December 2009 Foreign TL Foreign TL Currency Amount Currency Amount
EUR 225.000 461.048 225.000 486.068 USD 220.000 340.120 220.000 331.254 TL 2.428 2.428 252.698 252.698
803.596 1.070.020
The lease revenues from Korupark Shopping mall and Torium Shopping mall are pledged within the context of borrowings.
NOTE 15 - EQUITY
The Company, increased its issued capital from TL176,100,000 to TL224,000,000 through public offering. The nominal value of shares subjected to public offering was TL47,900,000 and additional shares with nominal value of TL8,452,942 has been offerred by the existing shareholders. The compulsory prospectus of the public offering was registered by the İstanbul Commercial Registration Office on 7 October 2010 and announced in the Trade Registry on 14 October 2010. The Company’s quoted shares are traded in the İstanbul Stock Exchange as from 21 October 2010.
Shareholders
A Group B Group C Group % (quantity) (quantity) (quantity) 31 December 2010
Aziz Torun 37,41 44.870 - 38.918 83.788 Mehmet Torun 37,37 - 44.835 38.882 83.717 Y. Emre Torun 0,03 - 35 35 70 Torun Pazarlama A.Ş 0,02 32 32 - 64 Ali Coşkun 0,01’den az 4 - - 4 Mahmut Karabıyık 0,01’den az - 4 - 4 Other 25,16 - - 56.353 56.353
Total paid-in capital 44.906 44.906 134.188 224.000
A Group B Group C Group % (quantity) (quantity) (quantity) 31 December 2009 Aziz Torun 49,96 44.870 - 43.110 87.980 Mehmet Torun 49,92 - 44.835 43.074 87.909 Y. Emre Torun 0,04 - 35 35 70 Torun Pazarlama A.Ş. 0,08’den az 32 32 69 133 Ali Coşkun 0,01’den az 4 - - 4 Mahmut Karabıyık 0,01’den az - 4 - 4
Total paid-in capital 44.906 44.906 86.288 176.100 TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 15 - EQUITY (Continued)
In accordance with decision of the Board of Directors numbered 63 and dated 27 August 2010, and based on the Article 8 of the Articles of Association, the Company decided to increased its issued capital through public offering, within the limits of the registered capital of TL1,000,000,000 to TL224,000,000 from TL176,100,000. In the context of the capital increase, it was decided that, TL47,900,000 of the increased capital would be contributed by the public offering through the sale C group shares (current shareholders were restricted to acquire those shares). Additionally, a total of 4.191.251 C group shares that are held by the shareholders namely Aziz Torun and Mehmet Torun and 70.440 C group shares that are held by the corporate shareholder namely Torun Pazarlama A.Ş. would be offered to public. In case that sufficient excess demand is achieved in the public offering, additional 4.226.471 C group shares that are held by Aziz Torun and Mehmet Torun would be additionally subjected to public offering in accordance with the Serial I, No: 40 decree of the CMB: ‘Registration of Shares to CMB Registry and Guidelines for Public Offering’. According to the decision of the Board of Directors of Istanbul Stock Exchange on 7 October 2010, the Company’s C Group shares with total nominal value of TL47,900,000 is traded in the İstanbul Stock Exchange starting from 21 October 2010. As a result of the public offering, the Company earned TL349,670,000 against its shares with TL47,900,000 nominal value and the difference of TL301,770,000 has been accounted for as share premiums in the consolidated financial statements.
The legal reserves consist of first and second reserves, appropriated in accordance with the Turkish Commercial Code (“TCC”). The TCC stipulates that the first legal reserve is appropriated out of statutory profits at the rate of 5% per annum, until the total reserve balance reaches 20% of the Company’s paid-in share capital. The second legal reserve is appropriated at the rate of 10% per annum of all cash distributions in excess of 5% of the paid-in share capital. Under the TCC, the legal reserves can only be used to offset losses and are not available for any other usage unless they exceed 50% of paid-in share capital.
In accordance with the Communiqué No:XI-29 and related announcements of CMB, effective from 1 January 2008, “Share capital”, “Legal Reserves” and “Share Premiums” shall be carried at their statutory amounts. The valuation differences (such as inflation adjustment differences) shall be disclosed as follows:
- If the difference is arising due to the inflation adjustment of “Paid-in Capital” and not yet been transferred to capital should be classified under the “Inflation Adjustment to Share Capital”;
- If the difference is due to the inflation adjustment of “Legal Reserves” and “Share Premium” and the amount has not been utilized in dividend distribution or capital increase yet, it shall be classified under “Retained Earnings”.
Companies whose shares are quoted in ISE are subject to profit distribution rules of CMB as follows:
Dividend is distributed according to Communiqué Serial: IV, No: 27 on “Principles Regarding Distribution of Dividends for the quoted entities subjected to Capital Market Board Law”, principles determined in the Articles of Association and dividend distribution policy which is declared by the Companies to the market.
In addition, the decision also allows companies to compute their distributable profit amounts by considering the net profit for the period presented in the publicly disclosed financial statements prepared in accordance with the Communiqué Serial: XI, No: 29, if such distributable profits could be fully recovered from resources subject to profit distribution in the statutory records. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 15 - EQUITY (Continued)
The composition of the Company’s equity based on the Serial:XI, No:29 decree of the CMB is as follows:
31 December 2010 31 December 2009 Share capital 224.000 176.100 Share Premium 301.770 - Restricted reserves 3.127 3.127 Retained earnings 1.625.941 1.090.300 Net profit of the year 214.245 535.641
2.369.083 1.805.168
As of 31 December 2010 and 2009 the net distributable profit according to the statutory accounts and the reserves that can be subjected to the distribution are as follows:
31 December 2009 Distributable current year profit 12.799 - Extraordinary reserves 4.152 4.152 Share premium 301.770 -
318.721 4.152
As of 31 December 2010 and 2009, the details of restricted reserves are as follows:
31 December 2010 31 December 2009 I. First legal reserves 767 767 II. Second legal reserves 2.360 2.360
3.127 3.127 TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 16 - REVENUE AND COST OF REVENUE
31 December 2010 31 December 2009 Revenues
Residence sales 160.585 65.380 Rent income 58.584 46.803 Electricity sales income 9.283 7.675 Commercial goods sales 3.785 - Other 691 300
232.928 120.158
Cost of revenue
Cost of residence sales (121.760) (34.570) Operational expenses for rental properties (10.243) (2.733) Electricity expenses (9.022) (7.150) Goodwill of Nishistanbul project (8.250) - Cost of commercial goods sold (3.270) - Costs of other services and goods (365) (730
(152.910) (45.183)
Gross profit 80.018 74.975
Operational lease revenues mainly consist of rent income from shopping malls and rent income from excavation area. Shopping malls in operation are Ankara Ankamall, Bursa Korupark, Bursa Zafer Plaza and Antalya Deepo. Ankamall is owned by Yeni Gimat - associate of the Company. According to the management agreement, management of the Bursa Korupark and Antalya Deepo is conducted by Torun AVM and the management of Bursa Zafer Plaza is conducted by Zafer Plaza İşletmeciliği A.Ş. (Note 23).
Electricity income and expenses consist of the electricity expenses of the shopping malls charged to companies managing the shopping malls.
The commercial goods sold and cost of commercial goods sold are related to sales of machinery, equipment to lessees of Torium Shopping Mall and white goods sales to the owner of residences related to Nishistanbul Project. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 17 - MARKETING, SELLING AND DISTRIBUTION GENERAL ADMINISTRATIVE EXPENSES
31 December 2010 31 December 2009 General administrative expenses
Public offering costs (10.818) - Taxes, duties and fees (5.056 (1.490) Donations (4.161) - Personnel expenses (1.487) (682) Consultancy expenses (943) (674) Depreciation expenses (183) (195) Other (850) (536)
(23.498) (3.577)
The public offering expenses include fees for ISE quotation, CMB registry and consultancy expenses that are related to public offering. The major part of taxes, duties and fees are related to property taxes. The property taxes are amounting to TL3,047 in 2010 and TL988 in 2009. Agreement for a donation amounting to TL4,000 is signed with the Bursa Metropolitan Municipality related with the metro construction along Korupark Shopping Mall and Residences. Additionally, the metro station will be named as “Korupark Metro Station”.
Marketing, selling and distribution expenses
Advertising expenses (2.462) (541) Marketing expenses for residence sales (1.626) (2.464) Marketing expenses for shopping malls (715) (682) Shopping mall event management activities (258) (226) Other (481 (524
(5.542) (4.437) TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 18 - EXPENSES BY NATURE
31 December 2010 31 December 2009 Cost of residence sales (121.760) (34.570) Public offerring expenses (10.818) - Operating expenses for rental properties (10.342) (2.777) Electricity expenses (9.022) (7.150) Project goodwill expense (8.250) - Taxes, duties and fees (5.056) (1.490) Donations (4.161) - Cost of commercial goods sold&services charges (3.270) - Advertising expenses (2.462) (541) Personnel expenses (1.798) (850) Marketing expenses for residence sales (1.626) (2.464) Consultancy expenses (943) (674) Marketing expenses for shopping malls (715) (682) Depreciation expenses (183) (195) Other (1.544) (1.804)
(181.950) (53.197)
NOTE 19 - OTHER INCOME/EXPENSES
31 December 2010 31 December 2009 Other income
Net gain from fair value adjustment on investment property (Note 8) 166.660 488.159 Other 540 274
167.200 488.433
Other expenses
Other (1.069 (266)
(1.069) (266) TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 20 - FINANCIAL INCOME/EXPENSES
31 December 2010 31 December 2009 Financial income:
Interest income on time deposits 18.233 7.792 Foreign exchange gains, net (*) 3.562 - Gain on sale of associate - 4.327 Other 1.282 1.476
23.077 13.595
(*) As of the reporting date, since the Group has shown net foreign exhange, the same period’s foreign exhange losses and gains are net off.
Financial expenses:
Interest expenses (39.208) (33.225) Loss on derivative financial instruments (*) - (4.846) Foreign exchange losses, net - (2.251) Other (184) -
(39.392) (40.322)
(*) Loss on derivative financial instruments is related with the interest rate swap contracts in 2009. The revenue that is generated from derivative instrument is TL969 in 2010 and it is classified as other at the financial income.
NOTE 21 - EARNINGS PER SHARE
In Turkey, companies can increase their share capital by making a pro-rata distribution of shares (“Bonus Shares”) to existing shareholders from retained earnings and revaluation surplus. The issue of such shares is treated as the issuance of ordinary shares in the calculation of earnings per share.
Loss per share disclosed in the consolidated statement of loss determined by dividing net income attributable to ordinary shareholders by the weighted average number of shares in existence during the period concerned.
31 December 2010 31 December 2009 Net income attributable equityholders of the 214.245 535.641 parent in full TL Weighted average number of ordinary shares 185.468.871 176.100.000
1,16 3,04 TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 22 - TAX ASSETS AND LIABILITIES
The Company is exempt from corporate income tax in accordance with paragraph d-4 of Article 5 of the Corporate Income Tax Law and in accordance with paragraph 6-a of Article 94 of the Income Tax Law, the earnings of the real estate investment trusts are subject to withholding taxes, According to the Council of Ministers decision, No: 93/5148, the withholding tax rate is determined as “0”. Therefore, the Company has no corporate tax obligation.
Tax charges for the period ended at 31 December 2010 and 2009 are as follows:
31 December 2010 31 December 2009 Corporation tax provision (1.274) - Deferred tax income - -
(1.274) -
Deferred taxes
The Company does not recognise any deferred tax assets and liabilities based on temporary differences arising between the balance sheet items as reported for IFRS purposes and the statutory financial statements since the Company is exempt from corporate income tax after the REIC conversion on 25 January 2008.
NOTE 23 - BALANCES AND TRANSACTIONS WITH RELATED PARTIES a) Balances with related parties at 31 December 2010 and 2009 are as follows:
31 December 2010 31 December 2009 Financial payables to related parties Torunlar Gıda - 1.982
- 1.982
The Company has borrowed funds from Torunlar Gıda which is a related party. The interest rate of this borrowing is determined by the related parties at the market interest rate. As of 31 December 2010, there is no financial payable to related parties (31 December 2009: TL1,982).
31 December 2010 31 December 2009 Trade payables to related parties
Torun Yapı 701 - Torunlar Gıda 20 - Mehmet Torun 4 - Other - 7
725 7 TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 23 - BALANCES AND TRANSACTIONS WITH RELATED PARTIES
31 December 2010 31 December 2009 Other liabilities to related parties
Torun AVM 2.776 -
2.776 -
31 December 2010 31 December 2009 Financial receivables from related parties
Nokta İnşaat - 29.237
- 29.237
31 December 2010 31 December 2009 Trade receivables from related parties
Torunlar Aşçıoğlu Kapıcıoğlu Proje Ortaklığı 34.008 - Torun AVM 1.304 4.666 Zafer Plaza İşletmeciliği A.Ş. - 2.146 Torun Yapı - 7.859
35.312 14.671
Torun AVM, is providing management and administration services to Antalya Deepo and Bursa Korupark Shopping Malls which are owned by the Company. In accordance with the management agreement signed for Bursa Korupark Shopping Mall, management fee is paid to Torun AVM which is 2% (VAT excluding) of the sum of montly rent bills charged to renters. In accordance with the management agreement signed for Antalya Deepo Shopping Mall, management fee is paid to Torun AVM which is 2% (excluding VAT) of the sum of the monthly rents charged to the lessees.
Zafer Plaza İşletmeciliği A.Ş. is providing management and administration services to Zafer Plaza Shopping Mall which is owned by the Company. In accordance with the management agreement signed for Zafer Plaza Shopping Mall, Torunlar REIC has a fixed rent income amounting to TL8,400 for the years 2010, 2009 and 2008. a) Notes receivable from related parties at 31 December 2010 and 2009 are as follows:
31 December 2010 31 December 2009 Notes receivable from related parties
Torunlar Gıda (*) 05 4.327 Aziz Torun - 2.716 Mehmet Torun - 2.716
105 9.759
(*) Notes receivable from Torunlar Gıda with a maturity of 31 December 2010 are related to the sale of Nokta İnşaat (Note 12). TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 23 - BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Continued)
31 December 2010 31 December 2009 Other receivables from related parties
Nokta İnşaat - 211 Torunlar Gıda - 418
- 629 b) For the years ended 31 December 2010 and 2009 rent and interest income from related parties are as follows:
2010 2009 Sales to related parties
Torun AVM 21.000 39.650 Zafer Plaza İşletmeciliği A.Ş 8.553 8.413 Torun Yapı 6 6.854 Torunlar Gıda 6 4.327 Aziz Torun (*) - 3.301 Mehmet Torun (*) - 3.301
29.565 65.846
(*) Sales made to shareholders of the Company; Aziz Torun and Mehmet Torun are related with the sale of Korupark Residence which is composed of totally 4,021.78 m² and 16 residences. The notes received from Torunlar Gıda with a maturity of 31 December 2010 are related with the sales of Nokta İnşaat (Note 12).
Zafer Plaza İşletmeciliği A.Ş. is providing management and administration services to Zafer Plaza Shopping Mall which is owned by the Company. In accordance with the management agreement signed for Zafer Plaza Shopping Mall, Torunlar REIC has a fixed rent income amounting to TL8,400 for the years 2010 and 2009. c) For the years ended 31 December 2010 and 2009 commission paid, service and interest expenses to related parties are as follows:
2010 2009 Purchases from related parties
Torun Yapı 8.936 49.552 Torun AVM 7.860 - Torunlar Gıda 86 38 Torun Pazarlama A.Ş. 55 27
16.937 49.617
Trade payables to Torun Yapı as of 31 December 2010 and 2009 are related with the subcontractor activities of Torun Yapı for the real estate projects. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 23 - BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Continued)
Interest income/expenses
2010 2009 Interest income:
Nokta İnşaat - 1.305
2010 2009 Interest expenses:
Torun AVM 265 - Torunlar Gıda - 540
265 540 d) Remuneration of key management
2010 2009
Salaries and premiums 862 358
The remuneration of key management consists of short-term wages and other short-term benefits and free from long-term benefits.
NOTE 24 - FINANCIAL RISK MANAGEMENT
The Company’s activities expose it to a variety of financial risks, including the effects of changes in debt and equity market prices, foreign currency exchange rates and interest rates. The Company’s management focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Company.
Liquidity Risk
Liquidity risk is the inability of the Group to match the net funding requirements with sufficient liquidity. The Group management tries to avoid liquidity risk from daily operations by trying to keep sufficient levels of cash and to have open credit lines with creditors. Man- agement also tries to align the repayment of borrowings obtained for the construction and acquisition of investment properties with the rental revenue streams from such properties to the extent possible. For the construction of residential units the Group obtains cash advances from customers by engaging in pre-sales agreements to minimize the funding requirement in such projects. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 24 - FINANCIAL RISK MANAGEMENT (Continued)
The analysis of the Group’s financial liabilities with respect to their maturities as of 31 December 2010 is as follows:
Carrying Contractual Up to 3 months 1 year to Over value cash flow 3 months to 1 year 5 years 5 years Short-term financial liabilities (Non-derivative): Financial liabilities 235.038 254.567 27.491 227.076 - - Trade payables 31.035 31.035 31.035 - - - Due to related parties 3.501 3.501 3.501 - - - Provisions ------Other short-term liabilities 12.970 12.970 12.970 - - -
282.544 302.073 74.997 227.076 - -
Long-term financial liabilities (Non-derivative): Financial liabilities 552.122 642.101 - - 475.080 167.021 Provisions 90 90 - 90 - -
552.212 642.191 - 90 475.080 167.021
834.756 944.264 74.997 227.166 475.080 167.021
Carrying Contractual Up to 3 months 1 year to Over Derivative financial liabilities: value cash flow 3 months to 1 year 5 years 5 years Derivative cash inflows 264.489 264.489 - - - 264.489 Derivative cash outflows (264.489) (264.489) - - - (264.489)
Derivative instruments, net cash inflows ------TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 24 - FINANCIAL RISK MANAGEMENT (Continued)
The analysis of the Group’s financial liabilities with respect to their maturities as of 31 December 2009 is as follows:
Carrying Contractual Up to 3 months 1 year to Over value cash flow 3 months to 1 year 5 years 5 years Short-term financial liabilities (Non-derivative): Financial liabilities 162.179 187.603 17.838 169.765 - - Trade payables 8.612 8.612 6.413 2.199 - - Due to related parties 1.989 1.989 7 1.982 - - Provisions ------Provisions 68.953 68.953 1.727 67.226 - - Other short-term liabilities 241.733 267.157 25.98 241.172 - -
Long-term financial liabilities (Non-derivative): Financial liabilities 462.881 538.467 - - 372.559 165.908 Trade payables ------Provisions 5 5 - - - 5
462.886 538.472 - - 372.559 165.913
704.619 805.629 25.985 241.172 372.559 165.913
Carrying Contractual Up to 3 months 1 year to Over Derivative financial liabilities: value cash flow 3 months to 1 year 5 years 5 years Derivative cash inflows 291.641 291.641 - - - 291.641 Derivative cash outflows (291.641) (291.641) - - - (291.641)
Derivative instruments, net cash inflows ------
Interest rate risk
The Group is exposed to interest rate risk through the impact of rate changes on interest bearing assets and liabilities. These exposures are managed by offsetting interest rate sensitive assets and liabilities and using derivative instruments when considered necessary.
In this context, matching of not only maturities of receivables and payables but also contractual repricing dates are crucial. In order to keep the exposure of financial liabilities to interest rate changes at a minimum, “fixed interest/floating interest”, “short-term/long- term”, “TL/foreign currency” balance should be structured consistent within and with assets in the balance sheet. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 24 - FINANCIAL RISK MANAGEMENT (Continued)
At 31 December 2010, if interest rates at contractual repricing dates of TL denominated financial assets and liabilities with variable interest rates has strengthened/weakened by 1% with all other variables held constant, income would have been TL41 lower/higher as a result of interest expenses.
At 31 December 2010, if interest rates at contractual repricing dates of EUR and USD denominated financial assets and liabilities with variable interest rates has strengthened/weakened by 1% with all other variables held constant, income would have been TL1,040 lower/ higher as a result of interest expenses.
Average effective annual interest rates of balance sheet items as of 31 December 2010 and 2009 are as follows:
31 December 2010 (%) TL EUR USD
Current assets Cash and cash equivalents 8,84% 4,09% 5,52% Trade receivables 7,16% - -
Current liabilities Financial liabilities 8,64% 4,74% 4,36% Due to related parties - - - Trade payables - - -
Non-current liabilities Financial liabilities - 4,91% 5,82%
31 December 2009 (%) TL EUR USD
Current assets Cash and cash equivalents %10,47 %3,68 - Trade receivables %8,49 - -
Current liabilities Financial liabilities %11,56 %4,64 %5,64 Due to related parties - - %5,53 Trade payables %7,01 %0,66 %0,25
Non-current liabilities Financial liabilities %21,02 %4,54 %5,91 TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 24 - FINANCIAL RISK MANAGEMENT (Continued)
The Company’s financial instruments that are sensitive to interest rates are as follows:
31 December 2010 31 December 2009 Financial instruments with fixed interest rate Time deposits 438.591 72.617 Financial assets 29.459 - Financial liabilities 518.736 278.735
Financial instruments with floating interest rate Financial liabilities 264.527 341.799
Group’s financial assets and liabilities in carrying amounts classified in terms of periods remaining to contractual repricing dates as of 31 December 2010 are as follows: 31 December 2010 Up to 3 months More than Non-interest 3 months to 1 year 1 year bearing Total Cash and cash equivalents 266.439 172.156 - 69 438.664 Financial assets - - 29.459 - 29.459 Trade receivables 13.584 705 4.729 - 19.018 Due from related parties 35.417 - - - 35.417 Other current assets 39.642 - - - 39.642 Inventories - - - 51.769 51.769 Investment property - - - 2.388.865 2.388.865 Tangible fixed assets - - - 1.115 1.115 Intangible fixed assets - - - 82 82 Investments in associates - - - 125.458 125.458 Other non-current assets - - 74.350 - 74.350
Total assets 355.082 172.861 108.538 2.567.358 3.203.839
Bank borrowings (444.920) (342.220) - - (787.140) Finance lease liabilities (20) - - - (20) Trade payables (31.035) - - - (31.035) Due to related parties (3.501) - - - (3.501) Provisions for employment termination benefits - - - (90) (90) Other liabilities (12.970) - - - (12.970)
Total liabilities (492.446) (342.220) - (90) (834.756)
Net repricing position (137.364) (169.359) 108.538 2.567.268 2.369.083 TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 24 - FINANCIAL RISK MANAGEMENT (Continued)
31 December 2009 Up to 3 months More than Non-interest 3 months to 1 year 1 year bearing Total Cash and cash equivalents 72.617 - - 22 72.639 Trade receivables 15.243 7.288 5.310 - 27.841 Due from related parties - 52.137 2.159 - 54.296 Other current assets 1.676 - - - 1.676 Inventories - - - 101.648 101.648 Investment property - - - 2.096.430 2.096.430 Property, plant and equipment - - - 407 407 Goodwill - - - 8.250 8.250 Investments in associates - - - 115.478 115.478 Other non-current assets - - 31.122 - 31.122
Total assets 89.536 59.425 38.591 2.322.235 2.509.787
Bank borrowings (308.117) (107.159) (208.122) - (623.398) Finance lease liabilities (410) (1.229) (23) - (1.662) Trade payables (6.413) (2.199) - - (8.612) Due to related parties (7) (1.982) - - (1.989) Provisions for employment termination benefits - - - (5) (5) Other liabilities (1.726) (67.227) - - (68.953)
Total liabilities (316.673) (179.796) (208.145) (5) (704.619)
Net repricing position (227.137) (120.371) (169.554) 2.322.230 1.805.168
Credit risk
The Group is subject to credit risk arising from trade receivables related to credit sales and deposits at banks.
The Group keeps majority of its deposits with top 10 retail banks established in Turkey, with which the Group had standing relations.
Credit risk mainly consists of receivables from related parties. Credit risk of receivables from third parties is managed by securing receivables with collaterals covering receivables at the highest possible proportion. Methods used are as follows:
• Bank guarantees (letter of guarantee, letter of credit, etc.), • Mortgage on real estate, • Cheques and notes,
In credit risk control, the credit quality of each customer is assessed; taking into account its financial position, past experience and other factors, individual risk limits are set in accordance and the utilisation of credit limits is regularly monitored. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 24 - FINANCIAL RISK MANAGEMENT (Continued)
Credit and receivable risk of financial instruments as of 31 December 2010 is as follows:
Trade Receivables Deposits in 31 December 2010 Related party Other party banks Maximum exposed credit risk as of reporting date 35.417 19.018 438.591 Secured portion of the maximum credit risk by guarantees, etc, - 2.096 - A. Net book value of financial assets either are not due or not impaired 35.417 15.048 438.591 - Secured portion by guarantees, etc, - - - B. Financial assets with renegotiated conditions - - - - Secured portion by guarantees, etc, - - - C. Net book value of the expired but not impaired financial assets - 2.096 - - Secured portion by guarantees, etc, - 2.096 - D. Net book value of the impaired assets
- Overdue (Gross book value) - 1.874 - - Not overdue - - - - Impairment (1.874) - Secured portion of the net value by guarantees, etc, - - -
Credit and receivable risk of financial instruments as of 31 December 2009 is as follows:
Trade Receivables Deposits in 31 December 2009 Related party Other party banks Maximum exposed credit risk as of reporting date 54.296 27.841 72.621 Secured portion of the maximum credit risk by guarantees, etc, - 2.520 - A. Net book value of financial assets either are not due or not impaired 54.296 23.462 72.621 - Secured portion by guarantees, etc, - - - B. Financial assets with renegotiated conditions - - - - Secured portion by guarantees, etc, - - - C. Net book value of the expired but not impaired financial assets - 2.520 - - Secured portion by guarantees, etc, - 2.520 - D. Net book value of the impaired assets
- Overdue (Gross book value) - 1.859 - - Not overdue - - - - Impairment - (1.859) - - Secured portion of the net value by guarantees, etc, - - - TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 24 - FINANCIAL RISK MANAGEMENT (Continued)
While determining the amounts mentioned at above such as guarantees, the factors that increases the credibility are not considered. In the financial assets of the Company which are subject to credit risk, no impairment risk has been identified. Additionally, Company’s off balance sheet items which are subject to credit risk include overdued but not impaired assets. a) Credit quality of not yet due, not impaired receivables that conditions are re-negotiated
31 December 2010 31 December 2009 Group 1 - - Group 2 14.515 23.462 Group 3 - -
14.515 23.462
Group 1 - New customers (less than three months) Group 2 - Existing customers with no defaults in the past (excluding related parties) Group 3 - Existing customers with some defaults in the past of which were fully recovered (excluding related parties) b) The aging table of the receivables that are past due but not impaired
31 December 2010 31 December 2009 Past due 1-3 months 2.096 2.520
2.096 2.520
Foreign exchange risk
The Group is exposed to foreign exchange rate risk through operations done using multiple currencies. The main principle in the management of this foreign currency risk is maintaining foreign exchange position in a way to be affected least by the fluctuations in foreign exchange rates, in other words, maintaining foreign exchange position close to zero.
For this reason, the proportion of the positions of these currencies among each other or against new Turkish lira to shareholders’ equity is aimed to be controlled under certain limits.
The Group is exposed to foreign exchange rate risk mainly for EUR and USD. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 24 - FINANCIAL RISK MANAGEMENT (Continued)
Foreign currency position
Foreign currency denominated assets, liabilities and off-balance sheet accounts give rise to foreign exchange exposure.
Company’s assets and liabilities in foreign Exchange are not balanced through any off balance sheet instruments as of 31 December 2010.
The company does not have any export or import activity in 2010 and 2009.
Foreign currency denominated assets and liabilities held by the Group are as follows:
31 December 2010 31 December 2009 Assets 219.902 60.961 Liabilities (771.110) (605.747)
Net on-balance sheet position (551.208) (544.786)
Net off-balance sheet derivatives position - -
Net foreign currency position (551.208) (544.786) TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 24 - FINANCIAL RISK MANAGEMENT (Continued)
The original currency amounts of assets and liabilities denominated in foreign currencies and the total TL equivalent at 31 December 2010 are as follows:
EUR USD TL equivalent Current assets 25.358 108.630 219.902 Trade receivables 0 1.052 1.626 Monetary financial assets 25.358 107.578 218.276
Total assets 25.358 108.630 219.902
Current liabilities (14.429) (122.524) (218.988) Trade payables (1.142) (2.994) (6.968) Financial liabilities (13.287) (119.530) (212.020)
Non-current Liabilities (119.871) (198.250) (552.122) Financial liabilities (119.871) (198.250) (552.122)
Total liabilities (134.300) (320.774) (771.110)
Net balance sheet position (108.942) (212.144) (551.208)
Derivative financial assets 127.900 - -
Derivative financial assets (127.900) - -
Net position of off-balance sheet items - - -
Net foreign currency asset / (liability) position (108.942) (212.144) (551.208)
Net foreign currency position against currencies is as follows:
Against EUR (223.233) Against USD (327.975)
Net foreign currency position (551.208) TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 24 - FINANCIAL RISK MANAGEMENT (Continued)
The original currency amounts of assets and liabilities denominated in foreign currencies and the total TL equivalent at 31 December 2009 are as follows:
EUR USD TL equivalent Current assets 28.219 - 60.961 Trade receivables 13.741 - 29.685 Monetary financial assets 14.478 - 31.276
Total assets 28.219 - 60.961
Current liabilities (3.534) (89.900) (142.977) Trade payables (232) (76) (615) Financial liabilities (3.302) (89.146) (141.341) Other monetary financial liabilities - (678) (1.021)
Non-current Liabilities (127.900) (123.828) (462.770) Financial liabilities (127.900) (123.828) (462.770)
Total liabilities (131.434) (213.728) (605.747)
Net balance sheet position (103.215) (213.728) (544.786)
Derivative financial assets 135.000 - - Derivative financial assets (135.000) - -
Net foreign currency asset / (liability) position (103.215) (213.728) (544.786)
Net foreign currency position against currencies is as follows:
Against EUR (222.975) Against USD (321.811)
Net foreign currency position (544.786) TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 24 - FINANCIAL RISK MANAGEMENT (Continued)
The table below shows the Company’s sensitivity for 10% fluctuation of USD and EUR. These amounts represent the effect on the consolidated statement of comprehensive income of 10% fluctuation of USD and EUR against TL. During this analysis all other variables especially interest rate are assumed to remain constant.
Foreign currency sensitivity analysis as of 31 December 2010 and 2009 are as follows:
Gain/Loss Equity
31 December 2010 Appreciation Depreciation Appreciation Depreciation
+/- 10% fluctuation in USD rate USD net asset/liability 21.214) 21.214 - - Secured portion from USD risk USD net effect (21.214) 21.214 - -
+/- 10% fluctuation in EUR rate EUR net asset/liability (10.894) 10.894 - - Secured portion from EUR risk EUR net effect (10.894) 10.894 - -
Gain/Loss Equity
31 December 2009 Appreciationı Depreciation Appreciation Depreciation
+/- 10% fluctuation in USD rate USD net asset/liability (21.559) 21.559 - - Secured portion from USD risk USD net effect (21.559) 21.559 - -
+/- 10% fluctuation in EUR rate EUR net asset/liability (11.236) 11.236 - - Secured portion from EUR risk EUR net effect (11.236) 11.236 - -
Capital risk management
The Company attempts to manage its capital by minimising the investment risk with portfolio diversification. The Company’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital and to keep a gearing ratio that is in-line with industry averages.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 24 - FINANCIAL RISK MANAGEMENT (Continued)
Gearing ratios as of 31 December 2010 and 2009 are as follows:
31 Aralık 2010 31 Aralık 2009 Total liabilities 834.756 704.619 Cash and cash equivalents (438.664) (72.639)
Net debt 396.092 631.980 Total shareholders’ equity 2.369.083 1.805.168
Invested capital 224.000 176.100
Gearing ratio 18% %36
NOTE 25 - FINANCIAL INSTRUMENTS
Fair value of financial instruments
Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation, and is best evidenced by a quoted market price, if one exists.
The fair values of financial instruments that are not traded in an active market have been determined by the Company using available market information and appropriate valuation methodologies. However, judgement is necessarily required to interpret market data to estimate the fair value. Accordingly, the estimates presented herein may differ from the amounts the Company could realise in a current market exchange.
The following methods and assumptions were used to estimate the fair value of the financial instruments for which it is practicable to estimate fair value:
Financial assets:
The fair values of cash and due from banks are considered to approximate their respective carrying values due to their short-term nature.
Expertise values are used on the determination of the fair values of investment property (Note 8).
The carrying value of trade receivables, which are measured at amortised cost, along with the related allowances for uncollectability are assumed to approximate their fair values.
The fair values of balances denominated in foreign currencies, which are translated at period-end official exchange rates announced by the Central Bank of Turkey, are considered to approximate their carrying value. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 25 - FINANCIAL INSTRUMENTS (Continued)
Financial liabilities:
The fair value of liabilities arising from financial leasing are considered to approximate their respective carrying values due to their short- term nature.
Derivative financial instruments are carried at their fair values.
Carrying values and fair values of TL and foreign currency denominated borrowings fixed and floating rates are as follows:
Carrying values Fair values 31 December 2010 31 December 2009 31 December 2010 31 December 2009 Financial liabilities 783.263 618.552 783.016 668.604
NOTE 26 - SUBSEQUENT EVENTS
The “Building Permit”, which is required as per the 21th article of the Zoning Law to start the Mall of Istanbul Project construction in the Lot 858, Block 2, Ikitelli-2 Neighborhood, Başakşehir District, Istanbul Province has been acquired on 18 March 2011.
52.73 m2 area, which is located on a property of 18,208.90 m2 area, the deed of which is located in the İkitelli Neighborhood of Istanbul Province and is recorded in the Lot Records as Block 858, Lot 1 has been purchased for TL158,000. The area was previously owned by 8 shareholders and was shown in Prime Değerleme ve Danışmanlık A.Ş.’s report no : 2010/TGYO/10 dated 31 December 2010 as the area where the Mall of Istanbul Project is planned to be constucted and had an average unit price of TL1.000 per m2.
As of 26 January 2011, land of 9,261.58 m2, adjacent to the Mall of Istanbul Project, which will be completed on the area owned by the Group (land Block 858, Lot 2 Ikitelli-2 Neighborhood, Başakşehir District, Istanbul Province) has been acquired. The deed of this 9,261.58 m2 area (which corresponds to the 122.071/240.000 share of Block 858, Lot 1 owned by S.S. Masko Istanbul Manufacturers of Wooden Furniture Society Collective Housing) has been acquired by the partnership and a TL12,000 lien has been placed on the area (to cover the independent sections’ guarantee, which will be built and delivered) in favor of the S.S. Masko Istanbul Manufacturers of Wooden Furniture Society Collective Housing. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 27 - OTHER ISSUES THAT SIGNIFICANTLY AFFECT THE FINANCIAL STATEMENTS OR OTHER ISSUES REQUIRED FOR THE CLEAR UNDERSTANDING OF FINANCIAL STATEMENTS
The joint venture group including the Company has won the tender regarding the income sharing project in exchange of the sale of the land on which Ali Sami Yen Stadium is located. The land is located on the land in Dikilitaş Neighborhood, Şişli District, Istanbul Province located in the Plate 58, Block 1199, Lot 384.The Project that will be applied on the land comprised touristic and commercial real estate developments as well as recreational area and the costs of construction is to be borne Torunlar Aşçıoğlu Kapıcıoğlu Project Partnership fort his purpose, Torunlar Aşçıoğlu Kapıcıoğlu Project Partnership has been formed on 18 October 2010. The partnership shares are as follows: 65% Torunlar REIC, 35% Aşçıoğlu A.Ş. and 5% Kapıcıoğlu A.Ş.. An Income Sharing in Exchange of the Sale of Land contract has been signed with The Republic of Turkey Prime Ministry Housing Development Administration of Turkey on 10 November 2010 in the scope of the mentioned Project. The Project Partnership commited finish the undertaken construction works within 1095 days after signing the Contract. Maintenance, preservation and administration share of the land sale completion duration is the period between the provisional acceptance date and final acceptance date and is 365 days in total. Therefore the total Contract duration is 1460 days.
The project consists of approximately 10,500 m2 recreational area (fountains, playgroungs, car parks and greenery) and 23,100 m2 tourism and commercial area (hotel, business center, residence, bureau, office, shopping mall, cinema, theatre, entertainment center, multi storey shops, museum, library, showroom, cultural facilities, diner, restaurant, casino, administration buildings, bank and financial institutions etc.).
Land improvement related with the project has not started as at 31 December 2010 and the land of Ali Sami Yen Stadium on which the project is to be constructed will be delivered to the Project Partnership on 30 May 2011 as green field.
The payment schedule committed to the Housing Development Administration of Turkey for the amount related with the land is as follows:
Additional administration share income in return Total Payment of land sales as per administration days after Administration the revised offer income share in the contract share in exchange submitted in favor of the exchange of Payment no signing date of the land administration the land sale
1 30 92.300 2.700 95.000 2 360 69.225 2.025 71.250 3 540 69.225 2.025 71.250 4 720 69.225 2.025 71.250 5 900 69.225 2.025 71.250 6 1140 46.150 1.350 47.500 7 1425 46.150 1.350 47.500
461.500 13.500 475.000
The amount shown in the table above is the whole obligation of the Project Partnership for the land related with the project, and the share of the Group in the obligation is 65%. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. 31 ARALIK 2010 TARİHLİ FİNANSAL TABLOLARA İLİŞKİN AÇIKLAYICI DİPNOTLAR (Tutarlar aksi belirtilmedikçe bin Türk Lirası (“TL”) olarak ifade edilmiştir.)
NOTE 27 - OTHER ISSUES THAT SIGNIFICANTLY AFFECT THE FINANCIAL STATEMENTS OR OTHER ISSUES REQUIRED FOR THE CLEAR UNDERSTANDING OF FINANCIAL STATEMENTS (Continued)
Approval of Financial Statements:
The Group’s consolidated financial statements as at 31 December 2010, as audited by independent auditors and in accordance with the Capital Markets Board’s Communiqué Serial: XI, No: 29 have been reviewed. It has been concluded that the consolidated financial statements present fairly the consolidated financial position of the Group and the results of its operations in accordance with the regulations issued by the Capital Markets Board and Group accounting policies. With the Board of Directors’ decision dated 7 April 2011, Assistant General Manager İsmail Kazanç and Accounting Manager Lütfü Vardı are authorized to sign electronically the consolidated financial statements for public announcement.
159 CORPORATE COMPLIANCE ALIGNMENT REPORT n
Torunlar REIC Annual Report 2010 / 160 CORPORATE GOVERNANCE ALIGNMENT REPORT
CORPORATE GOVERNANCE ALIGNMENT DECLARATION
1 Torunlar Real Estate Investment Company. adopts “Corporate Governance Principles” enacted by the Capital Markets Board (CMB) on July 4, 2003 with Corporate Governance decision No. 35/385, declared to public in July 2003, and revised in February Alignment 2005. Torunlar is aware that the application of these principles is to the benefit Declaration of our company, interest holders and finally to our country. Work regarding the adaptation to the “Corporate Governance Principles” published by the Capital Markets Board continues.
We understand that the way to reach our company’s vision, mission and our strategic objectives necessitates the implementation of the Corporate Governance Principles. Principles of fairness, transparency, responsibility and accountability, which are the main principles of corporate governance, have been adopted by our company.
A Corporate Governance Committee was formed within our company in the framework of compliance with Capital Markets legislation and Corporate Governance Principles. At the meeting of our Board of Directors dated 24.05.2010, Ali Alp, independent member of the board of directors coupled with Şerife Cabbar and Lütfü Vardı were elected to membership of the Corporate Governance Committee and Mehmet Mumcuoğlu, independent member of the board of directors, along with Ali Coşkun and Mahmut Karabıyık were elected as members of the Audit Committee. The Corporate Governance Alignment Report of our company, which has adopted the principles of promoting Turkey and the Turkish Real Estate Investment Company Sector in the international platform, reliability and transparency, for the period 01.01.2010 – 31.12.2010 is presented below. The report is available in our annual report in addition to the Investor Relations Section of our company’s web page.
CORPORATE GOVERNANCE PRINCIPLES
Section 1 Shareholders
2 In order to manage the processes of providing proper and timely information to domestic and foreign investors, running the relations with the capital markets Investor Relations auditors, ensuring the exchange of information, capital increases and follow-up of Department public offer transactions, andInvestors Relations Department reporting to the CFO has been set up. It is among the duties of this department to prepare documents for shareholders to utilize during General Assembly meetings and to ensure easy access n
161 CORPORATE GOVERNANCE ALIGNMENT REPORT
of shareholders to these documents.
The department also answers incoming inquiries and information requests concerning the company. It informs Torunlar REIC shareholders and broker analysts preparing reports of the company through all possible means of communications (face-to-face discussions, participation in conferences, meetings, web page, telephone calls, e-mails, investor bulletins, investor presentations, etc.) about the company. It prepares company annual reports. Questions asked to the Investor Relations are answered according to our Company’s Disclosure Policy. All shareholders who wish to receive information about our company may send an e-mail to [email protected] to relay their requests for information. All other communications channels are also available for shareholders.
3 Disclosure The disclosure policy of Torunlar REIC requires that all shareholders and investors be Shareholders’ Right treated equally and that information that has the same content be shared correctly to Information and simultaneously. Information requests of shareholders concerning transactions that are not yet public knowledge are assessed according to this policy and any private disclosure specific to a person is never allowed. Verbal and written requests for information from shareholders are answered according to the Capital Markets Legislation and Istanbul Stock Exchange Legislation. Shareholders’ right to obtain information is treated with utmost care. . Information is announced to the public through the Public Disclosure Platform and the press. To ensure that shareholders reach public information more easily and in accordance with Corporate Governance Principles, Section II, Article 1.11.5, all the public disclosure is broadcast on the company’s Internet site (www.torunlargyo. com.tr) in Turkish and English. Local and foreign investors are generally informed at the time of general assembly meetings, capital increases and public announcement of financial statements or afterwards through e-mail or face-to-face meetings. Requests by telephone are answered immediately and those by e-mail in the shortest possible time. There is no unanswered written inquiry from shareholders made to our company within the period. Shareholders have requested information concerning shopping centers owned by the company, tenant and store numbers, gross leasable area, progress of projects developed within the year, year-end sales targets, etc.
During the period 01.01.2010 – 31.12.2010 there have been 12 special case announcements regarding our company. All material event disclosures about our company are also made on time to the Public Disclosure Platform and the Capital Markets Board. Work has been completed on the electronic medium required for shareholders to exercise their rights. It is possible to reach the financial reports through our website and financial and administrative information through the other links. Torunlar REIC Annual Report 2010 / 162 CORPORATE GOVERNANCE ALIGNMENT REPORT
4 While the agenda is set for the general assembly meetings, it is ensured that each item is clear and understandable so as not to cause any confusion. Care is taken so General Assembly that all issues that need to be discussed as required by the legislation are covered in Information the agenda items.
The year 2009 Ordinary General Assembly meeting was held at the company head office on 03.05.2010 under the supervision of a government observer Mrs. Gülten Topal assigned with the authorization letter No. 26421 dated 30.04.2010 of the Provincial Directorate of Industry and Commerce. The meeting was conducted according to Article 370 of the Turkish Commercial Code without conforming to an invitation procedure and with 100% participation of all the shareholders holding the entirety of the 176,100,000 shares. Shareholders of Torunlar REIC attended the General Assembly in person.
Our board of directors decision No.2010/33 dated 03.05.2010 concerning minutes of the meeting and authority to represent and bind were registered on 26.05.2010 and published on pages 510 and 511 of the Trade Registry Gazette of Turkey No. 7575 dated 01.06.2010. During the Ordinary General Assembly the balance sheet, statement of income, the board of directors’ annual report, the auditors and independent audit reports were read out and accepted unanimously. By taking into consideration that a major portion of the profits for 2009 consist of revaluations, it was unanimously decided not to distribute dividends. Members of the Board of Directors and Auditors were unanimously cleared individually.
• To serve until the first ordinary general assembly meeting to be held, Aziz TORUN and Ali Coşkun on behalf of A group shareholders, Mehmet TORUN and Yunus Emre TORUN on behalf of B Group shareholders, Mehmet Mumcuoğlu and Prof. Dr. Ali ALP as Independent Board members, and Mahmut KARABIYIK as the member of the board of directors to be elected by the General Assembly were elected.
• Kadir BOY and Gözde GÖKTÜRK were elected as Auditors to serve until the first ordinary general assembly meeting to be held.
Minutes of the General Assembly can be reached on the company Internet (web) site.
The Ordinary General Assembly Meeting of our company for 2010 shall be held on Wednesday, 25.05.2011 at 14:00 in the Torium Shopping Center Conference Hall owned by our company at Saatdere District, E-5 Motorway, Haramidere, Esenyurt, Istanbul address.
Sample forms of the General Assembly invitation letters and proxy forms are provided on the company Internet (web) site. 163 CORPORATE GOVERNANCE ALIGNMENT REPORT
5 As indicated in article 9 of the articles of association; no privileged security can be issued other than the shares having the privilege to nominate candidates for Voting Rights and the election of members of the board of directors. No privilege can be created Minority Rights after going public, including the privilege to nominate candidates for the board of directors.
The management of the company and the authority to represent and bind towards third parties is undertaken by a board of directors consisting of 7 (seven) members, elected for a period of one year by the general assembly in the framework of the provisions of the Turkish Commercial Code, holding the qualifications indicated in the Turkish Commercial Code and Capital Markets Legislation.
In the framework of the principles in article 13 of the Articles of Association, A and B group shares have the privilege to nominate candidates for the election of members of the board of directors. Two of the board of directors members are elected from among candidates indicated by A Group shareholders, two from among those indicated by B Group shareholders and the other three members from among candidates nominated at the General Assembly by the General Assembly.
There is no privileged voting right in the meetings of the general assembly and the articles of association of our company. Shareholders or their proxies present at the general assembly meetings each has the right to vote once for each share. There is no participation relationship between shareholders and our company. There is no cumulative voting method in the articles of association of our company.
There is no member representing minority shares in our board of directors. Individuals who have the right to vote at the meetings of the general assembly may personally exercise their votes or may assign as representative a person who may/ may not be a shareholder in the company. Representatives who are shareholders will have the right to vote for each share they represent in addition to their own shares. The sample proxy for those who will not personally attend the meeting will be published in our website (www.torunlargyo.com.tr), Trade Registry Gazette of Turkey and daily newspapers. Voting is conducted by open ballot by raising hands for the agenda items during the meeting of the general assembly.
6 As required by article 36 of the articles of association and indicated in the relevant framework of the Turkish Commercial Code and Capital Markets Law, dividend Dividend Policy distribution and its timing are decided by the general assembly. Our company and Timing has determined the principles regarding the dividend distribution policy with the decision of the board of directors dated 16.09.2010 and numbered 2010/68. Accordingly, so long as it does not contradict the regulations of the Capital Markets Board, it was decided that the item of 50% of the distributable profit of the company being distributed in dividends be placed on the agenda for the submittal to to the voting of the general assembly and that in principle this dividend distribution policy be maintained subject to long term investments or other fundinga requirements for the long-term growth of the company and special cases necessitated extraordinary developments in the economic conditions.
The dividend distribution is an issue that is deemed important by Torunlar REIC for the interest of the shareholders. The delicate balance between the growth strategies of our company and dividend distribution is being carefully managed. In case there is any change in this policy, the public will be duly informed. There is no privileged share in dividend distribution. Torunlar REIC Annual Report 2010 / 164 CORPORATE GOVERNANCE ALIGNMENT REPORT
7 As indicated in article 8 of the articles of association; in case A or B Group shareholders wish to sell shares they hold other than Group C, the shareholder who Transfer of Shares wishes to sell (SELLER) will notify his wish to sell firstly to shareholders in the share group he wants to sell by registered letter. It is mandatory for this written request to include the amount of the shares he wishes to sell and the sales price information. Unless shareholders who receive this notification inform their intent to buy to reach the other side within 7 work days by registered letter, SELLER shall notify his intent to sell shares to other shareholders who have the privilege to nominate candidates to the board of directors by registered letter. It is mandatory in this notification as well for the SELLER to include the amount of the shares he wishes to sell and the sales price information. Unless shareholders who receive this notification inform their intent to buy to reach the SELLER within 7 work days by registered letter, SELLER is authorized to sell to third persons. However, this sale may not take place under more favorable conditions than what he offered to shareholders in terms of price or payment conditions. Share transfers performed contrary to the provisions of this paragraph will not be recorded in the share book by the board of directors.
Transfer of C group shares may not be restricted.
There is no provision in the company articles of association restricting the share transfer of the C group shares to be offered to the public.
The articles of association is published in Turkish in the company’s Internet site at the www.torunlargyo.com.tr address.
Section 2 Public Disclosure and Transparency
8 The public is informed correctly and in a timely manner by observing the issues included in the Capital Markets Board Communiqué Concerning Principles for the Company Disclosure Public Disclosure of Material Events (Series: VIII, No: 54). Meanwhile, all kinds of Policy important information that could affect the decisions of the shareholders and other interest owners are also disclosed to the public. For ease of access by our shareholders, this information is also announced on our Website. The Company Disclosure Policy that provides information in a timely, correct, complete, understandable, interpretable and a low cost manner to the public has been approved within this term and shall be submitted to the information of the General Assembly. The dividend distribution policy of the company appears in the annual report and the website, while it is submitted to the shareholders attention at the General Assembly meetings..
Within this scope, the Investor Relations Department is conducting the communications with shareholders and all other interested parties in a way to safeguard the rights and interest of our company and to prevent asymmetry in the sharing of information and to ensure its dissemination for in a timely, correct, understandable and analyzable way. 165 CORPORATE GOVERNANCE ALIGNMENT REPORT
9 In addition to all other subjects required by the Capital Markets Board Legislation, information about events that could result in a major change in the financial Material Event position and/or operations of the company is immediately announced to the public. Disclosures However, no announcement made to the public may contain any information that could prevent the competitive strength of the company and that could result in harmful results for the shareholders and interest owners and trade secrets of the company may not be disclosed. Torunlar REIC is making public announcements in accordance with the regulations and directives of the Capital markets Board and the Istanbul Stock Exchange.
In accordance with the Capital Markets Board Communiqué Concerning Principles for the Public Disclosure of Material Events (Series: VIII, No: 54) there have been 12 material event disclosures of our company in 2010 excluding news of Torunlar REIC by the Settlement and Custody Bank, Central Registry Agency, or persons, institutions and institutions. All the material event disclosures of the company are sent to the Istanbul Stock Exchange over the Public Disclosure Platform system.
The disclosures are published on the company’s Internet site.
Periodical financial statements, footnotes and interim annual reports are issued to show the true financial position of the company and are thus disclosed to the public. Financial statements are prepared in the framework of the Capital Markets Board Communiqués, in accordance with national/international accounting standards and in a consolidated manner. The applicable accounting policies are included in the financial statement footnotes. Our 2010 annual report is prepared in sufficient detail so that anyone who wants to have information about our company will reach relevant information and will be updated at every quarter according to the legislation/requirements. The annual report will be sent by e-mail to the people in our mailing list.
Our company selects an independent audit company every year and this independent audit company is reshuffled by required intervals. No consulting service is received from the company that is providing independent audit services.
Again in line with the Capital Markets Board Corporate Governance Principles, the company web site publishes the “Dividend Distribution Policy”.
All news and rumours about the company circulating in the national media including TV, printed press, Internet and Radio, is being monitored by media monitoring companies and are reported to senior company officers and to relevant company employees on a daily basis. If an unsubstantiated news story is published about the company, the Investor Relations department evaluates it. Following any disclosure request by the Capital Markets Board or the Istanbul Stock Exchange, or if necessary without awaiting the disclosure request, the necessary notifications are made in accordance with Torunlar REIC policy. Torunlar REIC Annual Report 2010 / 166 CORPORATE GOVERNANCE ALIGNMENT REPORT
10 Access to the company’s Internet site is through the address www.torunlargyo. com.tr . The main sections contained on our Web site are Torunlar REIC, Portfolio, Company Internet Site Investor Relations, Real Estate Investment Companies sector and News. Under the and its Contents Investor Relations tab of the company website; the corporate governance principles alignment report, most recent status of the articles of association, periodical financial statement and reports, portfolio tables, prospectus, public offer circulars, valuation reports, analyst reports, material event disclosures, capital increase statement, dividend distribution policy, company valuation report, general assembly information and short-cut links are provided on the Internet site.
The Internet site is regularly updated to reflect the current status of the company and the management structure. All information inquiries relayed by way of the Internet site are answered promptly by the company.
11 Disclosure of Real Person Ultimate Controlling Shareholder(s)
Shareholding and capital structure of Torunlar REIC A.Ş. before IPO
NAME LAST NAME/TRADENAME GROUP TYPE SHARE RATIO (%) SHARE AMOUNT (TL)
Aziz TORUN A REGISTERED 25,48 44.870.280
Aziz TORUN C REGISTERED 24,48 43.109.280
Torun Marketing JSC. A REGISTERED 0,018 31.698
Torun Marketing JSC. C REGISTERED 0,02 35.220
Ali COŞKUN A REGISTERED 0,002 3.522
Mehmet TORUN B REGISTERED 25,46 44.835.060
Mehmet TORUN C REGISTERED 24,46 43.074.060
Yunus Emre TORUN B REGISTERED 0,02 35.220
Yunus Emre TORUN C REGISTERED 0,02 35.220
Torun Marketing JSC. B REGISTERED 0,018 31.698
Torun Marketing JSC. C REGISTERED 0,02 35.220
Mahmut KARABIYIK B REGISTERED 0,002 3.522
TOTAL CAPITAL 100,00 176.100.000
The prospectus regarding the public offer of a total of 56,352,942 TL nominal value shares consisting of 47,900,000 TL to be offered by increasing the issued capital of our company from 176,100,000 TL to 224,000,000 TL and 8,452,942 TL to be offered by the existing shareholders was registered by the Istanbul Trade Registry Office on 07.10.2010 and has been published in the 95 page interval between pages 641-735 of the Trade Registry Gazette of Turkey No.7669 dated 14.10.2010. 167 CORPORATE GOVERNANCE ALIGNMENT REPORT
Shareholding and Capital Structure after IPO dated 21.10.2010
NAME LAST NAME/TRADENAME GROUP TYPE SHARE RATIO (%) SHARE AMOUNT (TL)
Aziz TORUN A REGISTERED 20,03 44.870.280
Aziz TORUN C REGISTERED 17,37 38.918.029
Torun Marketing JSC. A REGISTERED 0,01 31.698
Ali COŞKUN A REGISTERED 0,002 3.522
Mehmet TORUN B REGISTERED 20,02 44.835.060
Mehmet TORUN C REGISTERED 17,36 38.882.809
Yunus Emre TORUN B REGISTERED 0,02 35.220
Yunus Emre TORUN C REGISTERED 0,02 35.220
Torun Marketing JSC. B REGISTERED 0,01 31.698
Mahmut KARABIYIK B REGISTERED 0,002 3.522
New Shareholders Post-IPO C REGISTERED 25,16 56.352.942
TOTAL CAPITAL 100,00 224.000.000
The capital increase was registered by the Istanbul Trade Registry Office on 21.01.2011 and has been published on page 376 of the Trade Registry Gazette of Turkey No. 7738 dated 26.01.2011.
In accordance with the Capital Markets Board Communiqué Series: VIII, No: 54, in case the chairman and members of the board of directors of our company, general manager and assistant general managers, other individuals with authority in the company and shareholders who directly or indirectly possess 5% or more of the capital or total voting rights or those acting with the aforementioned persons buy or sell Torunlar REIC shares they must make material event disclosures. Torunlar REIC Annual Report 2010 / 168 CORPORATE GOVERNANCE ALIGNMENT REPORT
12 The names of members of the board of directors, auditors and persons in top management of our company and changes made within the year are included in the Disclosure of People annual report (01.01.2010-31.12.2010). with Access to Insider Information
Person Position
Aziz TORUN Chairman of the Board of Directors and CEO Ali ÇOŞKUN Deputy Chairman of the Board of Directors Mehmet TORUN Member of the Board of Directors Yunus Emre TORUN Member of the Board of Directors – Chief Marketing Officer Mahmut KARABIYIK Member of the Board of Directors Independent Mehmet MUMCUOĞLU Member of the Board of Directors Prof. Dr. Ali ALP Independent Member of the Board of Directors Kadir BOY Auditor Gözde GÖKTÜRK Auditor Yezdan KANAAT Chief Development Officer Remzi AYDIN Chief Construction Officer İsmail KAZANÇ Chief Financial Officer İlham İnan DÜNDAR Chief Operating Officer /Mall Management
Our independent member of the board of directors Seçkin KÖSE indicated that he will not be able to attend meetings of the board of directors for health reasons and resigned on 08.02.2010, our company’s board of directors unanimously decided at the meeting of the board of directors dated 08.02.2010 and numbered 2010/06 that Prof. Dr. Ali ALP who holds the same qualifications to replace Seçkin KÖSE, be appointed as a member of the board of directors to complete the term of the resigning member and to be submitted to the approval of the next meeting of the general assembly in line with the provisions of article 315 of the Turkish Commercial Code.
The list of those with access to insider information is published every quarter in the interim annual reports. 169 CORPORATE GOVERNANCE ALIGNMENT REPORT
Section 3 Stakeholders
13 Torunlar REIC corporate governance practices safeguard the rights of the stakeholders governed by legislation, legal regulations and mutual agreements. Disclosure to Company employees, shareholders, affiliates or third persons or institutions in a Stakeholders business relationship can notify their suggestions in these matters or violations directly to company executives.
Open and honest channels of communication are established with company employees and other stakeholders and utmost care is taken for them to be informed of issues that are of interest to them.
Stakeholders are informed about company issues that are of interest to them. Potential investors who are considering buying shares of our company are able to directly contact our Investor Relations Department and relay their requests for information. Torunlar REIC Investor Relations informs investors about the company through e-mails, telephone calls or meetings. Rights of all stakeholders are protected within the farmewprk of the ethical rules published by the board of directors.
14 The principle is to keep all channels of communication open and to eliminate all obstacles that could occur in front of the participation of stakeholders in the Stakeholders’ management. All the persons, groups or institutions that are impacted by our Participation in the operations or those who affect our operations are our stakeholders. Their comments Company Management and assessments are invaluable to us.
Within this scope as indicated in the ethical rules, the company policy is determined and updated by regular communication with employees and by considering their wishes as well. Regular coordination meetings are held with the participation of company employees under the chairmanship of the general manager. These meetings play an important role in the decision making process of the senior management of the company. No model was created for the participation into the management of the other stakeholders.
15 ŞThe company’s human resources policy aims to ensure the recruitment of a high quality workforce in line with our objectives and strategies, to ensure that this force Human Resources be evaluated in the most productive manner, to create an efficient organization Policy with a high level of motivation, and to offer our employees equal opportunities by providing them with satisfactory career possibilities.
Our most important asset is our human resources. The quality of our products and services starts with the quality of our employees.
Job requirements are highlighted during recruitment and the applicant is interviewed by the manager of the department that will employ the candidate, in addition to an HR evaluation. As Torunlar REIC we aim to hire individuals who are focused on success, innovative, conducive to teamwork, problem solver, customer and quality-focused. We also help our employees to develop their skills in this direction. Torunlar REIC Annual Report 2010 / 170 CORPORATE GOVERNANCE ALIGNMENT REPORT
All employees are treated equally during promotions.
Within the framework of ethical rules, the personal honor of each one of the employees individually and all kinds of rights allowed by law are protected. All precautionsmeasures are taken to provide a healthy and safe work environment.
Employees are expected to adopt our performance-focused management concept and to be aware that their individual participation will contribute to creating value for customers and shareholders.
As stated in the Company Personnel Code, the Accounting Office is responsible for executing and implementing all decisions related to employees including social assistance.
No complaints were filed with during this fiscal period for discrimination.
16 Our company has always placed emphasis on developing cooperation with stakeholders who adhere to ethical rules. Honest and equal treatment is ensured in Customer and Supplier relations with customers. Reliability of agreements is highlighted and commitments Relations are honoured in due time. Efforts are made to establish trust-based long-term relationships with suppliers.
17 In all its operations, our company acts with due care for social responsibility, compliance with laws and environmental values. No lawsuit was filed against the Corporate Social company during this period for environmental damages. Responsibility As the crossroads problemin front of our company’s Korupark Shopping Center located in Bursa could not be urgently solved with the budget of the Bursa Metropolitan Municipality, it was suggested to the Bursa Metropolitan Municipality that our company could provide a contribution to the costs of the station and crossroads and an agreement was reached for the crossroads project to be revised, and a direct access to be provided from the station to the shopping center, and the name of the station to be “Korupark Metro Station”, in return for our company to make a contribution of 4 million TL to the Municipality, our proposal was accepted with City Council decision dated 16.03.2010. Therefore, in return for the 4 million TL contribution that our company will make, the crossroads project was revised to be 3 lanes., As a result of the enlargement of the crossroads as access to the KORUPARK shopping center will be from the third lane rather than the side road, problems of vehicles and customers’ entrance into the shopping center have been eliminated. As a result of the revision in the metro project the construction of the station was moved forward to 2010 and a direct entrance into the shopping center was provided for and the metro station was named as “Korupark Metro Station” in an unchangeable way.
Since the revisions of the road, crossroads and metro station projects in return for 4.000.000 TL contribution of our company to the Bursa Metropolitan Municipality will significantly increase the customer potential of the shopping center and as a result of the name change of the metro station as “Korupark Metro Station”, in all 171 CORPORATE GOVERNANCE ALIGNMENT REPORT
types of brochures, booklets, maps, Internet page, etc. type documents and in the lightrail maps inside the metro wagons the name of the shopping center will be mentioned, this will increase the visibility of the Korupark name, provide advertising for the shopping center and contribute to the operational earnings of our company.
No other donations or aids were given away between the dates of 01.01.2010 – 31.12.2010.
18 The management, authority to represent and bind towards third persons is left to the board of directors consisting of 7 (seven) members elected by the general Structure and Formation assembly under the provisions of the Turkish Commercial Code for a period of of the Board of Directors one year, holding the qualifications indicated in the Turkish Commercial Code and and Independent Capital Markets Board Legislation.
Members A and B group shares have the privilege to nominate candidates for the election of members of the board of directors. Two of the board of directors members are elected from among candidates nominated by A Group shareholders, two from among those nominated by B Group shareholders and the other three members from among candidates nominated at the General Assembly meeting by the General Assembly. Two of the 3 members elected by the General Assembly are elected from among the independent candidates.
Aziz TORUN Chairman of the Board of Directors and CEO
Ali COŞKUN Vice-Chairman of the Board
Mehmet TORUN Member of the Board of Directors
Yunus Emre TORUN Member of the Board of Directors-Chief Marketing Officer
Mahmut KARABIYIK Member of the Board of Directors
Mehmet MUMCUOĞLU Independent Member of the Board of Directors
Prof. Dr. Ali ALP Independent Member of the Board of Directors
Members of the Board of Directors have been elected during the Ordinary General Assembly Meeting held on 03.05.2010 to serve until the next General Assembly.
In accordance with its Corporate Governance Principles, Torunlar REIC considers that the presence of independent members of the board of directors will provide significant contributions for the development and strengthening of the company’s activities and for the development of a more professional management concept.
There were no events in 2010 which would revoke the independence of current independent members. The case of members of the board of directors taking on another duty or duties outside of the company has been subject to specific rules with the articles of association.
Restrictions on directors have been indicated in article 21 of the articles of association; “If in the last two years any employment, capital or commercial relationships, whether directly or indirectly, are established or if any cognation or affinity by marriage up to third degree including spouses are present between the Torunlar REIC Annual Report 2010 / 172 CORPORATE GOVERNANCE ALIGNMENT REPORT
members of the board of directors and any parties who are party to the resolutions to be made by the board of directors, any member of the board of directors in such condition is obliged to report this to the board of directors with its grounds and have it recorded in the minutes of the meeting.
The members of the board of directors shall not participate in the negotiations on issues in favor of their own personal interests or interests of their relatives by blood or by marriage up to third degree including spouses or lineal consanguinity. Any members who violate this provision shall compensate any damages incurred by the company as a result of such relevant transaction he/she is involved in.
The members of the board of directors shall not make any commercial transactions within the scope of the company’s line of business with the Company in person or indirectly on behalf of themselves or others even if they are allowed by the general assembly or shall not make any commercial transactions within the scope of the company’s line of business on account of themselves or others or shall not join a company involved in the same kind of commercial transactions in the capacity of unlimited liable partner.
If they are not independent from persons who are party to any resolutions to be made by the board of directors in the meaning of subclause (g), paragraph 1, article 4 of the Communiqué of Principles on Real Estate Investment Companies, the members of the board of directors are obliged to report this to the board of directors with its grounds and have it recorded in the minutes of the meeting.
The entirety of the members of the board of directors is acting in accordance with these provisions.
19 While the basic qualifications of the BOD members meet CMB Principles, Section IV, articles 3.11.1, 3.1.2 and 3.1.5, they are highly qualified, knowledgeable and skillful Qualifications of the professionals with specific work experience and background. Members of the Board of Directors The Curriculum Vitaes of our Board members are available on our website and annual report.
20 Company’s Vision, Mission and Strategic Objectives
OUR VISION To transform Torunlar Real Estate Investment Company into a leading development and management company on a global scale in the area of mixed-use life-style centers consisting of units such as shopping centers, residences, offices and hotels.
OUR MISSION > To raise further our know-how, experience and high confidence in developing life- style centers and to become the name synonymous with high-quality life concept. 173 CORPORATE GOVERNANCE ALIGNMENT REPORT
> To Provide shopping centers, entertainment and business areas, and residential units reflective of the needs, preferences and interests of our customers, and adapt as they evolve.
> To establish and maintain a satisfying cooperation with all our stakeholders including our shareholders, employees, our tenants based on fair principles.
> To generate a network of reliable, sustainable and growing. life-style centers
OUR OBJECTIVES To closely monitoring value-adding opportunities to ensure the best return for the shareholders. To become a real estate investment company that distributes the highest dividend, that is reliable and preferred by investors by strengthening its position in the sector.
The Board of Directors must regularly convene once a month for as long there are no extraordinary circumstances and should review the level of the company achieving its objectives, its activities and its past performance.
STRATEGY > To continue to focus on shopping malls while increasing retail-based mixed-use projects.
> To produce mixed-use projects with offices, residences and hotel units taking advantage of the synergy of shopping centers.
> Active and dynamic asset management of our shopping malls
> To continue to leverage our strong development platform.
> To pursue selective developments in other high-growth real estate sectors.
> To leverage our track record of joint development arrangements.
21 Risk management has been placed among duties of the Executive Committee with the purpose of systematically managing the risks our company is exposed to. In Risk Management order to represent the risk management system towards the Board of Directors Aziz and Internal Control TORUN has been elected to be the Chairman of the Executive Committee, while Mechanism Yunus Emre TORUN, Yezdan KANAAT, İlham İnan DÜNDAR, Remzi AYDIN and İsmail KAZANÇ were elected as Members of the Executive Committee.
Although there is no legal obligation concerning the internal control unit, an Audit Committee Tasks and Working Principles Directive was prepared and an Audit Committee was formed in order to ensure the application efficiency of the internal and external auditing process in the company, its added value and the functioning and adequacy of the accounting, financial reporting and internal control related internal systems. Independent member of the board of directors Mehmet MUMCUOĞLU was elected as the chairman of the Audit Committee and Ali COŞKUN and Mahmut KARABIYIK were elected as members of the Audit Committee.
Torunlar REIC Annual Report 2010 / 174 CORPORATE GOVERNANCE ALIGNMENT REPORT
22 It was defined in article 16 of the company’s articles of association; The Board of Directors is obliged to perform the duties it is assigned with Turkish Authorities and Commercial Code, the Capital Market Legislation and these present articles Responsibilities of the of association. Any and all business and transactions which don’t require the Members of the Board of resolution of the General Assembly according to the relevant legislation and these articles of association shall be executed by the Board of Directors. Directors and Managers Particularly the Board of Directors;
• Determines and discloses to the public the mission and vision of the Company, • Continuously and effectively reviews the Company’s degree of achieving targets, operation and past activity, • Determines the levels of accomplishment of the Company’s activities, approved annual financial and business plans and establishes the times and conditions for those, • Establishes a risk management and internal auditing system which shall minimize the effects of the risks which the Company may encounter and takes the necessary measures for this system to operate properly; monitors the compliance of the Company’s activity with the legislation, the articles of association, internal regulations and the policies established, • Establishes the Company’s approach to the shareholder and public relations; offers solutions to any disputes which may arise between the Company and the shareholders and/or its employees, • Ensures full compliance with the legislations, the provisions of the articles of association, internal regulations and the policies established in exercising of rights by the shareholders and keeps in close cooperation with the corporate management committee and the investor relations department established in its organization for this purpose; • Determines and approves the annual business programme, budget and payroll and addresses and decides for any changes required in the above, • Ensures that balance sheets and income statements, periodic financial statements and annual reports are issued in accordance with the legislation and the international standards including the Capital Market Board Corporate Governance Principles, elaborated accurately and fairly and presented to the necessary bodies, • Determines the disclosure policy of the Company, • Takes the necessary measures to ensure the compliance of the Company’s structure with current conditions; organizes on-the-job training and career plans of managers and other employees; determines the principles for measuring their performance and rewarding, • Determines the code of conduct for the Company and its employees; takes incentives and measures in order to ensure that qualified personnel serve for the Company for a long period, • Ensures that the general assembly meetings are held in accordance with the law and the articles of association, • Controls the execution of the resolutions of the general assembly, • Determines the committees to be established within the body of the Company and their working principles; appoints their members and ensures their effective and efficient operation.
When performing the duties and responsibilities charged on it by both law and these articles of association, the Board of Directors, without sacrificing its own responsibility, can assign these partially to committees within the body of the 175 CORPORATE GOVERNANCE ALIGNMENT REPORT
Company by stating expressly their tasks.
In the framework of this article, the company is managed and represented to the outside by the Board of Directors. The Board of Directors executes the duties assigned to it by the Turkish Commercial Code, Capital Markets Law and other relevant legislation and the General Assembly.
23 According to article 19 of the company articles of association, the Board of Directors convenes with the call of the chairman or the vice chairman when it is deemed Fundamental Activities necessary for the operations of the Company. But it is required to convene at least of the Board of Directors once a month. Each of the members of the board of directors or auditors can also request the board to be convened for meeting by applying to the chairman or the vice chairman in writing. If the chairman or the vice chairman still doesn’t call the Board to a meeting, the members shall be entitled to call ex officio.The chairman is responsible for ensuring the board’s meetings, calls and negotiations are properly made and the resolutions made are written to minutes; it fulfills this responsibility through the Secretariat of the Board of Directors. Each member has one voting right at meetings. Right to vote is exercised in person. Unless one of the members requests a meeting, resolutions can also be made such that members notify their consents in writing for a proposal made by one member. The meeting agenda of the board of directors is determined by the negotiation of the chairman of the board of directors with the other members of the board of directors and the general manager. The meeting agenda can be directly determined by the chairman of the board of directors in emergencies. Agendas can be amended with the resolution of the board of directors. The place of the meeting is the head office of the Company. But the board of directors can also convene at another place provided that it decides so. The board of directors convenes with at least four members and makes its resolutions with the majority of the participants of the meeting. In case of equality of votes, such issue is left for the next meeting. A proposal which also receives equal number of votes at that meeting is deemed to be rejected. Votes at board of directors are exercised as affirmative or negative. A negative voter writes his/her reasonable and detailed refusal grounds under the resolution, signs and notifies to the company’s auditors. Detailed grounds for negative votes of independent members who exercise negative votes are disclosed to public on the website of the company. Members who are absent in the meeting shall not vote by way of writing, appointing attorneys or other ways. It is essential for the members of the board of directors to participate in the meetings in person. The opinions of a member who fail to participate in a meeting but notify his/her opinions in writing are presented to the information of other members.
During the fiscal period of 01.01.2010 – 31.12.2010 the Board of Directors met 102 times.
Decisions of the Board of Directors must be taken unanimously. The Capital Markets Board’s Communiqué on Real Estate Investment Companies (Article 21) makes it mandatory that unless taken unanimously, specific decisions must be disclosed to the public with a material event announcement to be submitted to the Istanbul Stock Exchange. To date no case that requires a material event disclosure in this matter has been experienced. Torunlar REIC Annual Report 2010 / 176 CORPORATE GOVERNANCE ALIGNMENT REPORT
24 According to article 20 of the Communiqué Concerning Principles on Real Estate Investment Companies, If the members of the board of directors are not Prohibition of Engaging independent from persons who are party to any resolutions to be made by the in Transactions and board of directors in the meaning of subclause (g), paragraph 1, article 4 of the Competing with the Communiqué of Principles on Real Estate Investment Companies, the members of the board of directors are obliged to report this to the board of directors with its Company grounds and have it recorded in the minutes of the meeting. In addition, members of the Board of Directors may receive permission from the General Assembly of the Company in order to be kept exempt from the prohibition of engaging in the transactions with the company imposed by article 334 of the Turkish Commercial Code and the prohibition of competing with the company imposed by article 335. Under the related article of the Communiqué it was made mandatory for this issue to be placed in the articles of association of the company. No problem has been faced within the period in relation to permissions given to members of the BOD for the prohibition of engaging in transactions and competing with the company.
25 The ethical rules of the company were not made public by the BOD of the company as they are not yet finalized. Ethical Code of Conduct that must be pursued in Ethical Rules daily life are relayed to company employees with in-company training sessions for information purposes. When our Board of Directors finalizes the Ethical Code of Conduct for the company and its employees, they will be disclosed to the public.
26 Executive Committee: Risk management has been included among the duties of the Executive Committee Number, Structure for the purpose of systematically managing the risks that the company is exposed and Autonomy of the to. . In order to represent the risk management system towards the Board of Committees Formed by Directors Aziz TORUN has been elected to be the Chairman of the Executive Committee, while Yunus Emre TORUN, Yezdan KANAAT, İlham İnan DÜNDAR, the Board of Directors Remzi AYDIN and İsmail KAZANÇ were elected as Members of the Executive Committee. Audit Committee: An Audit Committee Tasks and Working Principles Directive was prepared and an Audit Committee was formed in order to ensure the application efficiency of the internal and external auditing process in the company, its added value and the functioning and adequacy of the accounting, financial reporting and internal control related internal systems. Independent member of the board of directors Mehmet MUMCUOĞLU was elected as the chairman of the Audit Committee and Ali COŞKUN and Mahmut KARABIYIK were elected as members of the Audit Committee. Corporate Governance Committee: The Corporate Governance Committee Tasks and Working Principles Directive was prepared in order to ensure compliance to the company’s corporate governance principles, to monitor and develop them and the Corporate Governance Committee was established. Independent member of the board of directors Ali ALP was elected as chairman of the Corporate Governance Committee and Şerife CABBAR and Lütfi VARDI were elected as members of the Corporate Governance Committee.
27 Honoraria of the members of the Board of Directors are determined by the General Assembly and it was decided during the Ordinary General Assembly Meeting held on Financial Rights 03.05.2010 that members of the Board of Directors be paid monthly remuneration Provided to the Board of of net 2,000 TL and auditors net 1,000 TL. There have been no transactions that Directors might lead to conflict of interest such as extending loans to members of the BOD or executives or providing collateral on their behalf during the period.